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Sinosteel Equipment begins construction at Bolivia's Mutun steelworks

Sao Paulo — China's Sinosteel Equipment began construction of steelworks near Bolivia's Mutun iron ore mine on Wednesday, more than three months after government authorization, the Bolivian Chamber of Hydrocarbons and Energy said Thursday.

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Sinosteel was given the green light on April 2 to develop the Mutun steelworks at the site in Puerto Suarez, when Bolivian President Evo Morales signed legislation approving its construction.

The reason for the delay in construction was a lack of investments from the Bolivian government, sources familiar with the project said Wednesday. The Bolivian government was expected to invest $15 million-$20 million in the project, around 15% of the total amount for the steelworks, but the investment had not yet been released, the sources said.

The expectation is that the initial activities -- primarily cleaning the area for primary construction -- will take up to three months, then infrastructure works will begin.

Construction is expected to take about 30 months, with operations expected to begin no later than 2020. It was originally slated to start in April.

The first phase of the steelmaking project includes building an iron ore concentration plant with capacity of 650,000 mt/year, a pelletizing plant and a direct reduction plant with capacity of 250,000 mt/year and a steelworks with a continuous caster and a rolling mill that can produce 190,000 mt/year of long products.

A second phase aims to build a caster with capacity to produce 450,000 mt/year of flat products.

A third phase expects long steel capacity to reach 450,000 mt/year and flat steel capacity to reach 550,000 mt/year. No timetable was disclosed for phases two and three.

The legislation that Bolivia's parliament passed and Morales signed authorizes a preferential credit of $396 million with the Export-Import Bank of China to finance 85% for the construction, execution and commissioning of the Mutun steel plant.

Bolivia received the final investment approval from China in December with a total value of $420 million. Bolivia will invest $15 to $20 million in the project.

Mutun, in Santa Cruz state, has 40 billion mt of iron ore deposits. The mine has a production capacity of 1 million mt/year of iron ore fines.

--Guilherme Baida, guilherme.baida@spglobal.com

--Edited by Jennifer Pedrick, jennifer.pedrick@spglobal.com