By James Regan
SYDNEY (Reuters) - Australia's Sphere Investments Ltd has held fresh talks with potential investors to help develop an iron ore mine in Mauritania after a key investor dropped out, its managing director said on Thursday.
Sphere and its 50-50 partner in the $2.2 billion Guelb el Aouj project, the West African country's state-owned iron ore firm Societe Nationale Industrielle et Miniere, have been looking for fresh backing after Qatar Steel last month backed out of a plan to take a 15 percent stake.
The pullout came around two weeks after soldiers seized Mauritanian President Sidi Mohamed Ould Cheikh Abdallahi at his palace after he sacked senior army officers during a political crisis.
Sphere had in the past four weeks received strong interest in a stake of as much as 49 percent in the project, which aims to mine 17 million tonnes of ore annually, Sphere Managing Director Alex Burns told Reuters.
Burns said the investors were from the mining and steel industries. He declined to name any of them.
A nearby plant will compress the ore from the mine into iron pellets used as feedstock in steelmaking furnaces, he said.
The pellets, prized for the high iron content and currently produced only in Sweden and Brazil, sell for around $170 per tonne, roughly twice the price of iron ore, according to Burns.
The project, which could be in production as early as 2011, would be the first one of its kind in Mauritania owned in large part privately.
Almost all of the country's 11 million tonnes of iron ore exports last year was dug from government-owned mines.
In Guinea, another West African country, Rio Tinto Ltd/Plc has vowed to fight for its rights over a huge iron ore mining project after the government challenged the validity of a mining permit.
Burns said a feasibility study conducted earlier this year supported development of the Guelb el Aouj project, which could run for 30 years, with strong potential for an upgrade in size.
Sphere, which in the past has prospected for gold in Mauritania, will appoint a major investment bank to identify a new strategic partner in September, he said.
"All major international steel and iron ore companies have looked at Mauritania in the past two years seeking an entry point in to what is the seventh largest iron ore supplier in the seaborne traded market," Burns said.
James Wilson, a mining analyst with DJ Carmichael & Co in Perth, said demand for iron ore around the world has risen sharply in step with growing steel production in China, the world's single largest steel provider, and new entrants would have little difficulty finding buyers.
