By Amindeh Blaise Atabong

YAOUNDE, (Reuters) – The Cameroon government signed a 420 billion CFA franc ($675.96m) mining agreement for high-grade iron ore with a subsidiary company of Sinosteel Corporation Limited. This is as China searches for new resources of this crucial ingredient in steelmaking.

Sinosteel Cam S.A. will be the Cameroonian subsidiary to the Chinese state-owned miner. This project in Central Africa will help China diversify its sources for iron ore outside of Australia with whom it is currently at war.

Sinosteel Cam aims for 10,000,000 tonnes per year of ore with 33% iron content. It has signed a preliminary 20-year mining contract, which was witnessed by Reuters in Yaounde on Friday, May 6.

This would allow it to enrich the ore and produce 4,000,000 tonnes with 60% iron. The ore would then be shipped. Steel made from high-grade iron is more valuable because of its lower carbon emission than that produced by lower grades.

Convention stated that 30% of funding will come from self, and 70% through bank loans.

The Lobe mine is located 200 km (124 miles) southwest of Douala, and 40 kilometers from Kribi. It holds 632.8 millions tonnes of iron ore.

Sinosteel plans to build a beneficiation facility, a pipeline that will move the ore into the port and a terminal for minerals at the port. The convention did not specify what kind of power plant it would be.

Officials at Sinosteel have not yet stated when they plan to begin mining. However, Cameroon’s mining code requires that the company start within five years of the grant of a mining permit.

While the convention permits 15% iron ore to go to local markets, Cameroon may allow Sinosteel the right to export it to meet local demand.

Dodo Ndoke Gabriel, Cameroon’s mining minister said that the project will generate 600 jobs directly and 1000 indirect jobs.

($1 = 621.3400 CFA francs)