Ghar Jbeilat, the giant is sleeping.. Does Algeria benefit from the third global iron reserve?

Algeria -

For 70 years, it remained outside the circle of exploitation, until experts called it the sleeping giant of iron in Algeria. It is "Gebelat Cave" on the country's southwestern border, and its discovery dates back to 1952 during French colonialism.

Successive governments were unable to invest in it due to the difficult terrain, before President Abdelmadjid Tebboune decided, at the last meeting of the Council of Ministers, to launch the implementation of the first phase of the project.

The government authorities revealed that the mine has the third global reserve of iron, with a stockpile of more than 3.5 billion tons. It also announced the establishment of an Algerian-Chinese joint complex, and the completion of typical production units, with an investment cost of about two billion dollars, according to preliminary estimates.

The project is receiving great care from the Algerian government, as part of its strategic options to gradually get rid of dependency on hydrocarbons, especially with its possession of the Ballara iron and steel compound (the fruit of an Algerian-Qatari partnership), which is one of the largest industrial compounds of reducing agents in the world, and before that the African-classified Hajjar compound.

International prospects for the Algerian economy

On the importance of the project, Youssef Mili, head of the Investment and Institutional Development Forum, revealed that its annual production capacity of iron ore will reach 12 million tons (1.8 billion dollars), and this will make it the focus of attention of investors in the world and the international market.

The spokesman explained that if the ore is converted into building iron, its sales figure will reach 10 billion dollars annually, and experts expect incomes of about 16 billion dollars, and this makes Algeria need 6 new huge vehicles to produce rebar and open international horizons for the Algerian economy.

Youssef Mili said in a statement to Al Jazeera Net, "Ghar Jbeilat will ensure the sufficiency of Algeria's iron and steel, estimated at 5 million tons annually, before heading towards exporting the surplus for a material that is the basis of all mechanical industries and public works."

Youssef Mili: The mine's production capacity is 12 million tons per year and will open international prospects for the Algerian economy (Al Jazeera)

He added that the project provides 3,000 direct job opportunities at its beginning, while absorbing thousands of indirect job opportunities, and transforms the region from its military character into a large economic pole open on the coast and West Africa across the Mauritanian border.

Mohamed Hamidouch, an economist with the World Bank, confirmed that Algeria imports 5 billion dollars annually of steel products (600,000 tons), which covers only 20% of the national production needs.

He said in a statement to Al Jazeera Net that the entry of this mine into the exploitation stage will enable Algeria to put up two million tons annually for a period of 400 years in the international iron market, placing it in the ninth place in the world in terms of exports.

Financial and logistical challenges

Against this economic optimism, this project faces enormous challenges on several levels, according to experts.

Hamidoush stressed that exploiting the mine ore is very difficult from the technical side, due to its high phosphorous content, explaining that "the processes of fragmentation, magnetization, magnetic separation, flotation and washing managed to increase its iron content to about 65% and reduce the phosphorous content to 0.17%, but it remains insufficient."

And he indicated that the phosphorous rate in steel should not exceed between 0.020% to 0.050%, with the exception of those designated for hot pressing tools.

Accordingly, exploiting the mine requires a special technical path in converting steel into steel and iron, and this is what complicates its global marketing, but the mine’s output of phosphorous can be valued within the fertilizer components, as he put it.

Hamidouch pointed to other challenges, mainly related to the water need, estimated at 3 million cubic meters annually, the provision of energy (natural gas), and the transportation of iron, whether by rail (930 kilometers at $18 billion) or via pipes or electrical networks to use trucks that rely on sunlight.

In light of these challenges, the expert Hamidouch raised the obstacle to the cost of the project, and in "the absence of a financial structure and the lack of explicit sponsorship from the state treasury, it remains only to search for appropriate solutions for the Algerian party, with the inclusion of national banks in the financing."

As for the Chinese partner, the expert expects that his country's government will provide him with financing with distinct benefits, given that the iron activity is among the strategic sectors in China, which is the first importing country globally with 1,100 tons annually.

Youssef Mili said that the project faces the desire of the Chinese partner to produce the raw material and export it directly to the Chinese market in order to acquire all the iron mines in the world, while Algeria believes that it must be converted locally before exporting it in the form of semi-finished material.

Muhammad Hamidush believes that the Ghar Jbeilat project is strategic, but it faces major technical obstacles (Al-Jazeera)

Conditions for facing obstacles

To ensure the success of the project in the face of the aforementioned natural, technical and logistical obstacles, the expert Hamidouche suggests building a railway dedicated at the same time to transport people, goods and various mineral resources, because of the prospects and investment opportunities it opens in the southwest of the country in various sectors, as well as the treasury’s income from tax and hard currency.

The second scenario, which is not preferred by the expert, remains the completion of a metal transport pipeline, similar to the American experiment, with more than a thousand kilometers.

If the announced budget is maintained ($2 billion in principle), the reliance on the use of electric charges as a third option may carry surprises in the future, as the project cost exceeds 500% of those estimates, to stop when the exploitation license is granted, according to the expert.

In Hamidouch's view, the solution lies in searching first and foremost for financing the railway project with all its facilities, with an international financial institution, such as the World Bank, because it has the ability to evaluate the project well.

He also suggested negotiating with the various regional banks, to allocate the equivalent of 20 billion dollars, which also includes the inclusion of economic development projects integrated into the project, represented in the provision of water and energy resources.

Hamidouch stressed that external bank financing does not mean the absolute or relative management of the borrowed money, but the World Bank only monitors all expenditures and tenders when their amount exceeds $300,000, and this gives guarantee for the good progress of the project in all its stages.

Hamidouch also recommended that geopolitical tensions should be taken into consideration because Russia and Ukraine are iron exporters (26 and 46 million tons, respectively), and this "justifies China's interest in Algeria and Africa in general."