Perwaja Holdings Bhd, an integrated producer of primary steel products, will invest RM400 million to build the country's first iron ore pelletisation plant to reduce dependency on imported
iron ore.

Executive chairman Tan Sri Abu Sahid Mohamed said the plant, to be built in two phases, will have a total annual production capacity of 2.4 million metric tonnes when both phases are completed.

The first phase will begin in the first quarter next year and is scheduled for completion before end of 2012, he told reporters after the signing of contract agreement between Perwaja Steel Sdn Bhd and Sinosteel Equipment and Engineering Co Ltd in Kuala Lumpur today.

The US$65 million contract has been awarded to Sinosteel Equipment and Engineering, which will design and build the concentration and pelletising plant at Perwaja's manufacturing site in Kemaman, Terengganu.

Abu Sahid said the new production capacity will be able to meet 80 to 90 per cent of the company's need and able to save more than 15 per cent of production cost.

Currently, Perwaja and other direct reduced iron plants in Malaysia import 100 per cent of iron ore pellets from overseas. The price of iron ore has increased significantly from US$110 per metric tonne to US$220 per metric tonne this year.

In addition, the company is also looking for a joint venture with the Terengganu state government to get a regular supply of iron ore, which from the state alone amounted to a deposit of about 40 million tonnes, Abu Sahid said.

'We have submitted our application to the state government for a joint venture. Terengganu has quite a substantial deposit of iron ore, and instead of exporting it without added value, why not a joint venture?' he said.

The company is looking at a concession kind of agreement with the state government and in return, it will offer some kind of equity stake in the plant to the state government, Abu Sahid said.

Asked whether the company was interested in other state governments like Pahang and Kelantan, which also have iron ore mines, for a similar agreement, he said the company was open to the idea.

Abu Sahid said local mining areas which had been identified as sources included Bukit Besi in Terengganu and Bukit Iban, Lipis, Maran and Lanchang in Pahang as well as Kelantan, accounted for about 100 million tonnes of iron ore
reserves.

Currently, local iron ore is being exported at US$80 per metric tonne but it will be imported back as pellets at US$220 per metric tonne, he said. -- Bernama