Panmure Liberum believes Zanaga Iron Ore Co Ltd (AIM:ZIOC) metallurgical breakthrough could transform the economics of its flagship project in the Republic of Congo.
Recent test work has confirmed that Zanaga can produce direct reduction iron (DRI) grade pellet feed, a key input for the fast-growing electric arc furnace (EAF) steel sector.
DRI-grade feedstock must meet tight quality specifications, and Panmure highlights that recent samples from Zanaga exceeded those benchmarks, with iron content above 68.5% and low levels of impurities.
Crucially, these results imply the project can target premium pricing without significantly increasing costs. As Panmure put it, "there should be no expectation of any significant change to capital and operating costs as a result of the changes."
Zanaga is now updating its net present value (NPV) to reflect these higher-value outputs. The bank estimates the DRI-grade production could add up to $6 billion to the project’s NPV.
The company is also advancing three other initiatives: a feasibility study for an on-site pellet plant, a shift to a single 30 million tonnes per annum (mtpa) pipeline, and a move from wet to dry-stack tailings storage.
Each offers the potential to improve project economics and reduce risk. The pellet plant alone could lift NPV by more than $1 billion, while a single-pipeline strategy is expected to cut capex and operational complexity.
These upgrades mark a step change for Zanaga, which had previously based its valuation on a more conventional blast furnace feedstock.
Panmure concludes that recent developments not only open up a new customer base in the low-carbon steel market but also give the project greater commercial and environmental credibility.