Mclellans Phase I Report

Delta Steel Modernisation
Warri, Nigeria
Due Diligence Study – Phase 1 Visit Report
Confidential
September 2007
i
CONTENTS
Page
EXECUTIVE SUMMARY
1. INTRODUCTION 1-1
2. BACKGROUND – DELTA STEEL 2-1
2.1 Introduction 2-1

2.2 Location and Infrastructure 2-1
2.3 Plant Facilities 2-2
3. PROCESS FLOWS AND RECENT OPERATING STATISTICS 3-1

3.2 Production and Constraints 3-2
3.2.1 Recent Production 3-2
3.2.2 Current Production Constraints 3-4
4. PRODUCTS AND MARKETS 4-1

4.2 Domestic Market 4-1
4.3 West Africa – Wire Rod and Rebar Demand 4-2
4.4 Steel Production within Nigeria 4-3
4.5 Sales Strategy 4-3
4.6 Sales Prices 4-4
5. RAW MATERIALS - HANDLING AND PROCUREMENT 5-1

5.2 NIOMCO Iron Ore 5-1
5.3 NIOMCO Iron Ore Operations 5-2
5.4 Imported Iron Ore 5-2
5.5 DSC Iron Ore Reception and Jetty Facilities 5-2
5.6 Ore Storage and Handling 5-3
5.7 Limestone 5-3
5.8 Ferrous Scrap 5-3
5.9 Other Consumables 5-4
6. UTILITIES AND ENERGY PROCUREMENT 6-1

6.2 Electrical Power 6-1
6.3 Natural Gas 6-2
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7. PELLETISING PLANT 7-1
7.1 Process Description 7-1

7.1.1 Dosing and Mixing 7-2
7.1.2 Induration 7-2
7.1.3 Pellet Coating 7-2
7.2 Site Visit – Initial Assessment 7-3
8. LIME PLANT 8-1
9. DR PLANT 9-1

9.2 Background 9-1
9.3 DRI Shipments 9.2
9.4 DRI Operations 9-2
10. STEELMAKING PLANT (SMS) 10-1

10.2 Summary of Status and Recent Events 10-2
10.3 Summary of Original SMS Equipment Design and Production
Capacity 10-3
10.4 Original Design Production Capacity 10-4
10.5 Description of Current SMS Operation 10-5
10.5.1 Supply of Raw Materials 10-5
10.5.2 Steelmaking Operation 10-6
10.5.3 Factors Affecting Steelmaking Operations 10-9
10.5.4 Fume Collection System 10-11
10.5.5 Existing Ladle Treatment Facilities 10-12
10.5.6 Summary of SMS Operations 10-13
11. ROLLING MILL 11-1

11.2 Rolling Mill Design and Technical Data 11-1
12. UTILITIES AND ANCILLARIES 12-1

12.2 Electrical Power 12-1
12.3 Natural Gas 12-2
12.4 Cryogenic Plant 12-2
12.5 Water Supply and Water Treatment Plant 12-2
12.6 Compressed Air 12-3
12.7 Central Laboratory 12-3
12.8 Foundry 12-3
12.9 Workshop 12-3
12.10 Mobile Plant 12-3
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13. ENVIRONMENTAL CONSIDERATIONS 13-1

13.2 Environmental Impact Study 13-3
14. PLANT EXPANSION STRATEGY 14-1

14.2 Plant Expansions 14-3
14.2.1 Jetty and Material Handling Facilities 14-3
14.2.2 Lime-making Facilities 14-3
14.2.3 Utility and Ancillaries 14-4
14.2.4 Pellet-making Facilities 14-7
14.2.5 DRI Production Facilities 14-13
14.2.6 Steelmaking Facilities 14-14
14.2.7 Rolling Mill Facilities 14-22
14.3 Enhancement Schedules 14-22
14.4 Capex Budgets 14-24
14.5 Expansion Plan Summary 14-27
15. HUMAN RESOURCES AND MANAGEMENT 15-1

15.2 Current and Future Manpower Levels 15-1
15.3 Recruitment and Training 15-2
15.4 Development of Skills 15-3
15.5 Security 15-3
16. LOGISTICS - RAW MATERIALS AND FINISHED PRODUCTS 16-1

16.2 Post Expansion Logistics 16-1
16.3 Rail Transportation 16-2
16.4 River and Sea Transportation 16-3
17. RISK AND SWOT ANALYSIS 17-1

17.2 SWOT Analysis 17-1
17.2.1 Strengths 17-1
17.2.2 Weaknesses 17-2
17.2.3 Opportunities 17-3
17.2.4 Threats 17-4
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SECTION 1
INTRODUCTION
1-1
SECTION 1
INTRODUCTION
McLellan and Partners Limited (McLellan) has carried out Phase 1 Due Diligence on Delta
Steel Company PLC (DSC), Nigeria in connection with its planned expansion under the
Contract Agreement between Global Steel Holdings Limited (GSHL) and McLellan, and in
accordance with the Scope of Work provided by Credit Suisse Securities (Europe) Limited
(CS).
The two-stage Due Diligence being conducted by McLellan relates directly to similarly
staged loan facilities. The loans and associated Due Diligence processes are structured
as follow: -
1. An initial Due Diligence survey that is required to satisfy conditions for the
Bridge Loan Facility.
2. Detailed Due Diligence to cover the needs for the Main Term Loan and Working
Capital Loan.
This Due Diligence Visit Report supports the Project Overview and covers the CS Phase 1
Scope of Work, as defined below: -
CS Phase 1 Scope of Work
a) Confirm that the DSC plant is robust, well-managed and capable of producing the
currently stated production levels,
b) Confirm that the DSC plant is capable of being expanded in the manner and timeframe
proposed by GSHL without significant risk of delays and overruns and
c) Identify any key technical risks and challenges that DSC faces in implementing the
plant refurbishment and development programme proposed by GSHL.
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The Phase 1 investigation has allowed McLellan to obtain a good understanding of the
plant and company’s operations. It also provides an excellent platform for the
Phase 2 investigations.
Due Diligence Visit Report and Project Overview
In order to be in a position to answer CS Scope of Work questions McLellan has had to

assess a considerable amount of information. Much of this information is recorded in this
Visit Report. The important information relating to the Scope of Work questions and other
key areas of the project have been recorded in a separate Project Overview.
This Due Diligence Visit Report is an independent study by McLellan, an internationally

acknowledged consultancy specialising in the steel industry and for which such Due
Diligence work is in the normal line of business. McLellan has more than 80 years of
experience in this field of work and has no commercial links or possible conflicts of interest
with operating steel companies or steel equipment manufacturers. This study examines
the project from technical, financial and market perspectives and provides the proper
background for effective Due Diligence and financing decisions to be made.
Two McLellan specialists visited the DSC site during the week commencing 20th August
2007 to appraise of the plant, equipment and operations. During this process of site
inspection, interviews with DSC and GSHL management were conducted.
The information contained within this report was obtained from a range of sources
including documentation from GSHL and DSC relating to operations and equipment. Both
written and verbal information from GSHL and DSC has been taken into account and has
been backed up by McLellan’s own visual inspections, interviews and its in-house data
base of industry data. Other sources of information, such as Metal Bulletin have also
been used.
Current Operating Position
It is noted that all major DSC operating plants have been subject to considerable
maintenance and refurbishment to reinstate their operational status. The plant is currently
operating at a rate of less than 50% of nominal capacity; the main plant bottleneck being
the steel melting shop (SMS). Further details of the SMS operation are given in Section 10
of this Visit Report.
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Future Plant Developments
DSC has prepared a comprehensive expansion plan covering most of the major operating
units. The target expanded capacity is 2.4 Mt/y and a US$283M investment plan has been
defined to be scheduled over the next sixteen months.
Report Format
The Due Diligence spans an overall perspective of steel plant operations, from the supply
chain of raw material inputs, through procurement of utilities (such as power and natural
gas) and the complex logistics associated with this plant, to final product. Conceptual
investigations into future plant developments were also undertaken by McLellan with
particular emphasis on capital development plans and schedules.
DSC operates with two other iron and steel facilities in Nigeria that are also owned and
operated by GSHL. These are NIOMCO, the iron ore mining facility, and ASCL an
integrated steel mill and consumer of billets from DSC. NIOMCO supplies iron ore to DSC.
DSC currently supplies billets to ASCL rolling mills.
McLellan discussed the main principles related to these two other facilities with GSHL
management, however the time allowed for completion of the Phase 1 assignment and its
overall scope of work did not allow McLellan sufficient time to make visits to these plants.
Further Due Diligence of these particular facilities is planned during the Phase 2
investigations.
Section 2 of this Due Diligence Report describes the background to the steelmaking and
rolling operations. Subsequent sections describe the site operation, plant condition and
other important aspects such as product markets, logistics, human resources and financial
parameters relating to DSC.
The format of this Report is as follows:-
Section 1 Introduction
Section 2 Background – Delta Steel
Section 3 Process Flows and Recent Operating Statistics
Section 4 Products and Markets
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Section 5 Raw Materials – Handling and Procurement
Section 6 Utility and Energy Procurement
Section 7 Pelletising
Section 8 Lime Plants
Section 9 DRI Plant
Section 10 Steelmaking Plants
Section 11 Rolling Mill
Section 12 Utilities and Ancillaries
Section 13 Environment
Section 14 Plant Expansion Strategy
Section 15 Human Resources and Management
Section 16 Logistics – Raw Materials and Finished Products
Section 17 Risk and SWOT Analysis.
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SECTION 2
BACKGROUND – DELTA STEEL

2-1
SECTION 2
BACKGROUND – DELTA STEEL
2.1 Introduction
Delta Steel is a mini-mill based on electric steelmaking. The Works is ‘integrated’ – it

includes pelletising, Direct Reduced Iron (DRI) production and steelmaking as well as
downstream product rolling. The site in Delta State near to the city of Warri was
established in 1979 and DSC was the first ‘integrated’ steel plant in Nigeria to include
steelmaking as well as rolling. The works was built by an Austro-German consortium at a
cost of US$ 1.2 billion. The plant was commissioned in January 1982 and designed to
produce 1 Mt/y of steel products.
DSC produces steel from DRI and ferrous scrap obtained from the domestic market. DRI
is produced at DSC from iron ore fines supplied by NIOMCO, an iron ore mine that is also
owned and operated by GSHL.
2.2 Location and Infrastructure
DSC is located in Ovwian-Aladija, near Warri in Delta State. The Plant is in close proximity
to natural gas fields and two electrical power stations. Iron ore is currently transferred to
site mainly by rail. The original plant design intended that the plant would be serviced by
imported ore through river shipment. However, the development of the NIOMCO mine,
some 320 km to the north, meant that much of DSC’s iron ore requirement can be supplied
from this domestic source.
A standard gauge rail line connects ASCL (Ajaoukuta) and NIOMCO (Iktape) which are
situated in Kogi State and reaches to within 15 km of Delta Steel. DSC states that the
Nigerian Government (FGN) will complete this rail link over the next 6 months in order that
DSC and these two other facilities can be completely linked.
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The plant has nearby townships, schools and technical college. A 60 bed hospital/ clinic is
sited nearby. Figure 2.1 shows a map of Southern and Central Nigeria. Delta Steel, ASCL
at Ajaoukuta and NIOMCO, to the north of Okene, are shown on the map.
FIGURE 2.1 – MAP OF GSHL SITES
NIOMCO Ajaoukuta
Delta Steel
2.3 Plant and Facilities
The DSC works uses the natural gas based iron ore pelletising and direct reduction
ironmaking process. DRI is converted to liquid steel by electric arc furnaces (EAF) and
liquid steel is then cast into billets at the continuous casting plant.
A proportion of the billets produced are rolled into long products in the DSC rolling mill and
the balance is transferred to ASCL some 300 km to the north of Warri.
The DSC plant closed down due to financial difficulties in 1996 and was taken over and
reopened by GSHL in 2005. McLellan understands that before privatisation the Nigerian
government initiated an unsuccessful rehabilitation programme in 2000 with a consortium
comprising Osaka Steel Ltd and Voest Alpine Industrial Services.
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DSC’s iron and steelmaking facilities include: -
Ship Unloading Facility and Stockyard
 Quay for 18-20,000 dwt ships

 Two single grab ship unloaders
 Two cargo handling cranes
 Two stacker-reclaimers rated at 2,500 – 2,800 t/h
 One pellet stacker rated at 2,500 t/h
Pelletising Plant
 Lurgi travelling grate type annual capacity 1.45 Mt/y
Direct Reduction Plant
 Two Midrex 600 Series annual capacity 1.02 Mt/y
Lime Plant annual capacity 0.66 Mt/y
Steelmaking Plant
 Three 100t, 6.4m (60 MVA) EAFs annual capacity 1.0 Mt/y
 One Ladle Furnace converted from an existing EAF
Continuous Casting Plant
 Three 6-strand billet casters (120 mm²) annual capacity 0.96 Mt/y
Rolling Mill
 Light Section Mill annual capacity 0.30 Mt/y
Foundry
Ancillary Facilities
 Air separation plant (Korf-Linde)

 Central workshops
 Mobile plant workshops
 Training centre
 Administration building
Section 3 of this Due Diligence study shows the main process flows for the Delta Steel
operation.
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SECTION 3
PROCESS FLOWS AND RECENT OPERATING STATISTICS
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SECTION 3
PROCESS FLOWS AND RECENT OPERATING STATISTICS
3.1 Introduction
This Section of the Study shows the plant operation and flows of raw materials and semi-
finished products throughout the Delta Steel operation.
FIGURE 3.1 – DELTA STEEL PROCESS FLOW - 2006
Iron Scrap
Ore Limestone Scrap
Yard
Hydrated Prepared Scrap

Pellet Plant Burnt
Lime Lime Plant SMS
Lime
66000 t/y
1.45 Mt/yr Burnt Lime (4 EAF)*
O2 Air Separation
Hydrated Lime
DRI 1 Mt/Yr Plant
Cold
2260 NM3 / Hr of
Return Scrap
DR Plant Fines Briquettes N2
Briquette Plant Oxygen
(2 modules) * 1EAF converted to LF
1.02 Mt/yr
Liquid Steel N2
DRI
Continuous Casting Foundry
(3 Casters: 6 strands each)
DRI Silos 0.96 MTPA 1200 t/yr
4 x 5000 MT
Billets Billets Cast Products
N2 Rolling Mill Liquid Gases
(18 Stands)
Rolled 0.3 Mt/yr
3150 Nm3/Hr Products
Saleable Products
Pellets, DRI/ Cold Briquette Burnt/ Hydrated Lime
Iron, Billets and Cast Products
Rolled Products Liquid O2, N2,Argon
Figure 3.1 shows original design capacity rather than the present actual process flows.
This is because the plant is not currently in steady state operation and is still building up
towards full capacity after the extended plant shutdown.
Process flows of the expanded 2.4 Mt/y facility are shown in a later Section of this Report.
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3.2 Production and Constraints
3.2.1 Recent Production
Since the takeover of DSC by GSHL the production units have been progressively
repaired and brought back into operation. Most of the production units are now running,
however certain individual items of equipment, such as EAF 1, CCM 1 and one of the two
ball mills in the Pellet Plant, remain out of action and this is restricting steel production.
DSC states that these units will be back in operation by October 2007.
Table 3.1 shows production data for the main operating plants for the last full month. This
information was given to McLellan by DSC and is based on its monthly Performance
Report.
TABLE 3.1 – DELTA STEEL PROCESS FLOW - 2006
Plant Installed Available July 07 Capacity Capacity

Capacity Capacity Production Utilisation Utilisation
t/m t/m t/m (available (installed
capacity) capacity)
Pellet Plant 120,677 60,333 32,190 53% 27%
DRI (Gross) 80,000 40,000 28,294 71% 35%
Rolling Mill 25,000 36,490 12,562 34% 50%
Liquid Steel 83,333 44,000 16,833 38% 20%
Billets 80,000 43,120 16,464 38% 21%
Calcination 5,500 5,500 2,522 46% 46%
Hydrated Lime 2,750 2,750 1,134 41% 41%
Source: Delta Steel
Installed Capacity v Available Capacity
The available Pellet Plant capacity is lower than the installed capacity because of one of
the two ball crushers is awaiting an imported bearing. DSC stated that the machine
bearing had been previously ordered and is now at Lagos Port. DSC stated that pellet
plant capacity will increase to its installed capacity during September 2007.
The DRI Plant available capacity is lower than the installed capacity because only one of
the DRI modules is currently operating. DSC informed McLellan that the second unit is
stood down until increased pellet supply can be obtained. DSC also stated that both
modules have operated together during GSHL’s tenure at DSC.
The Rolling Mill available capacity is higher than the installed capacity because of the
product mix being rolled in July 2007. However, the rolling mill was in fact constrained
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because of the lack of availability of billets from the melt shop. This is also exacerbated
by the commitment of DSC to supply billets to ASCL.
The Steel Melting Shop available capacity is lower than the installed capacity because of
No 1 EAF being currently recommissioned. DSC states that this furnace will be available
for recommissioning during September 2007.
The Continuous Casting Shop available capacity is lower than the installed capacity
because No 1 CCM is currently being re-furbished. DSC states that this casting machine
will be available for recommissioning at the end of October 2007.
The available capacities of the Calcination and Hydrated Lime Shop are equal to that of
the installed capacity.
In summary, the DRI plant is currently constrained by the pellet plant and the continuous
caster and rolling mill are constrained by the supply of liquid steel from the SMS. DSC
states that it plans to increase the capacities in both the pellet plant and melt shop.
July Production v Available Capacity – Bottleneck Departments
The production of the Pellet Plant was only 53% of the available capacity in July 2007.
The delay statistics show that the main problems were as follows: -
 Equipment failure losses 39.57 hours

 Shutdown loss 8.92 hours
 External loss 275.4 hours
 Process and operation losses 17 hours
The pellet plant clearly suffered considerable delays during July 2007. McLellan
understands that most of these delays were enforced delays where the pellet plant was
stood down because of other departments or through other external reasons.
In July 2007 the SMS production was only 38% of available capacity. This is attributable
to extended furnace tap-to-tap times and operational problems, such as excessive
refractory wear and the inability to dynamically charge lime directly into the EAF. These
operational issues are further discussed Section 10 (Steelmaking and Continuous
Casting).
3.2.2 Current Production Constraints
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Integrated steelmaking requires most departments to be functioning at near full capacity in

order that production and sales are not compromised. All integrated production plants
have bottlenecks as this is the nature of all manufacturing processes.
At present, NSC and ASCL are constrained from expanding their sales due to the
shortage of billet production. When DSC produces more billets, the DSC and ASCL
rolling mills will be able to expand sales and displace exports. However, the SMS at DSC
has several current technical problems which are detailed in Section 9 of this Report.
Figure 3.2 shows that billet production increased month on month during the period
January to March 2007 and has since stabilized at a rate of around 16,000 t/month.
FIGURE 3.2 – DELTA STEEL PROCESS – BILLET PRODUCTION 2007
35,000
PLAN
30,000 ACTUAL
25,000
Billet Tonnes
20,000
15,000
10,000
5,000
0
January February March April May June July
Other departments may also have current constraints, but McLellan considers them to be
less significant than those in the SMS operation. It is often the case that when production
of steel is increased in the SMS other departments can usually cope with the additional
throughput. McLellan considers that this would be the case at DSC.
One of the questions posed by CS in its scope of work was “to confirm that the plant is
robust, well-managed and capable of producing the currently stated production levels“.
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Accordingly, McLellan confirms that the plant appears to be well managed. However, “the
stated production levels” are quantitively unknown to McLellan and it appears that the
plant is operating at a rate of around 16,000 t/m of billet. This is equivalent to some
200,000 t/y.
Expansion of steelmaking capacity is expected with the re-commissioning of EAF 1 and

CCM 1 and this is likely to raise current capacity by a further 50%. McLellan considers,
however, that the SMS must overcome its operational and equipment issues in order to be
able to achieve the next production level. Implementing the new capex scheme appears
to be the key to unlocking this potential.
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SECTION 4
PRODUCTS AND MARKETS

4-1
SECTION 4
PRODUCTS AND MARKETS
4.1 Introduction
Delta Steel produces both semi-finished (billets) and finished (rod and bar) long products.
Current production is primarily aimed at satisfying the domestic markets. However, future
expansion of the plant is expected to result in increasing amounts of sales to the domestic
market as well as export sales to other African and European markets. The current
product range is shown below: -
 Billets
 Rebar 12 – 40 mm
 Round bars
 Light angles
 Light tees
 Light channels.
Currently DSC mainly rolls rebar sections to satisfy the domestic market, but future target
markets are Nigeria, West Africa, Central Africa and Europe.
McLellan discussed markets with GHSL and much of the data presented in this section of
the Report was obtained from GSHL. McLellan considers that the GHSL information and
rationale presented in this section appears reasonable.
4.2 Domestic Market
DSC has made preliminary market studies into the size and profile of the domestic
market for steel products. Figure 4.1 shows that approximately two thirds of all Nigerian
steel demand is for long products. This is typical of a developing nation where most steel
products are used in construction and fabrication of simple structures. As the economies
of countries develop, the emphasis moves to a ratio of around 50:50 long to flat steel
products due to a gradual increase in manufacturing industries, such as white goods,
which require flat steel.
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FIGURE 4.1 – NIGERIAN STEEL CONSUMPTION – YEAR 2006
Total Steel Consumption

1.8 Mt/y
Long Product Flat Product

1.2 M t/y 0.6 Mt/y
Rebars HR Sheet & Plate

0.96 Mt/y 0.2 Mt/y
Wire Rods CRCA

0.1 Mt/y 0.15 Mt/y
Structurals GPGC
0.15 M Mt/y 0.25 Mt/y
`
DSC’s main focus is on the manufacture and supply of rebars. ASCL concentrates on the
production of structural steel sections and wire rods.
4.3 West Africa – Wire Rod and Rebar Demand
Table 4.1 shows other West African nations and their demand for construction rebars and
wire rod. The table also shows rebar and wire rod production in these regions.
TABLE 4.1 – WEST AFRICAN REBAR AND WIRE CONSUMPTION – 2006

TONNES PER MONTH
Country Imports Production Consumption

BENIN 6,000 6,000
TOGO 4,000 2,000 6,000
SENEGAL 10,000 10,000
MALI 10,000 10,000
GHANA 10,000 10,000 20,000
BURKINA FASA 4,000 4,000
NIGER 3,000 3,000
CHAD 3,000 3,000
IVORY COAST 3,000 3,000
OTHERS 5,000 5,000
TOTAL 58,000 12,000 70,000
Source: Delta Steel
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4.4 Steel Production within Nigeria
Table 4.2 shows rebar producing companies within Nigeria.
TABLE 4.2 – NIGERIAN LONG PRODUCT PRODUCERS
Current
Rated Capacity Capacity
Manufacturers Production
(t/y) (t/month)
(t/month)
REBARS
Mayor Group 240,000 20,000 8,000
Universal 60,000 5,000 4,000
Federated 60,000 5,000 4,000
Sunflag 60,000 5,000 3,500
Phoenix 24,000 2,000 2,000
GSM 36,000 3,000 2,000
African Steel 60,000 5,000 3,000
GIHL - DSC 320,000 26,667 12,500
Others 60,000 5,000 2,000
ROD & STRUCTURALS
GIHL - ASCL 580,000 48,333 4,500
Total Domestic Long
Product Availability 1,500,000 127,000 45,500
Source: Delta Steel
The remaining demand for rebars of 25,000 to 30,000 t/m is met by imports. The largest
exporter to Nigeria is Ukraine, followed by countries such as Turkey and China.
ASCL is the only Nigerian producer of wire rods and around 4,000 to 5,000 t/m of wire
rods are imported. Currently 100% of structural sections are imported.
DSC is the only integrated steel producer in Nigeria and the only producer of steel billets.
Hence, it is the only company with a supply of billets which is important in terms of billet
quality and cost.
4.5 Sales Strategy
DSC is ISO 9001 compliant and has quality accreditations with the Standards
Organisation of Nigeria and is in the process of achieving wider accreditation in
anticipation of production and sales expansions. Many of the larger Nigerian projects are
being developed by multinational companies and increasingly the demand for quality
assurance is becoming more widespread.
DSC claims it will adopt a strategy of differentiating itself from the other Nigerian suppliers
in terms of product quality and accreditation.
4.6 Sales Prices
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The Federal Government of Nigeria has imposed import tariffs on steel in order to protect
the local rebar producing industries. The import duty for rebar is 50% and for wire rods
and billets 5% duty is applicable. Figure 4.2 shows recent Nigerian rebar and wire rod
prices.
FIGURE 4.2 – NIGERIAN REBAR AND WIRE ROD PRICES
900
Rebars-trade
850 Rebar-construction
Wire rods
800
750
US$ per Tonne
700
650
600
550
500
Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07
Source: Delta Steel
Figure 4.3 shows the prices for Black Sea wire rod exports on an FOB basis. The Figure
shows a similar increasing trend. However, there is a significant difference in prices
because of the 50% import tariff.
Figure 4.4 shows the Black Sea billet prices. Rebar is manufactured from billet and the
relationship and volatility of billet prices in relation to rebar prices is very important to the
many Nigerian companies manufacturing rebar from purchased billet.
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FIGURE 4.3 – BLACK SEA REBAR PRICES
Source: SBB
FIGURE 4.4 – BLACK SEA BILLET PRICES
Source: SBB
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Future price forecasts for rebar and other products will be further examined during the
Phase 2 Due Diligence process.
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SECTION 5
RAW MATERIALS – HANDLING AND PROCUREMENT

5-1
SECTION 5
RAW MATERIALS - HANDLING AND PROCUREMENT
5.1 Introduction
The major raw material inputs to DSC are iron ore, steel scrap and limestone. However,
other consumable materials such as carbon and refractories etc are also required but in
much smaller amounts. Most of these important consumables will have to be imported
into Nigeria.
5.2 NIOMCO Iron Ore
Iron ore is supplied from NIOMCO in the form of ‘super concentrate’. The Itakpe iron ore
deposit has a reserve of around 200 Mt with an average iron content of 36% Fe. This has
to beneficiated to produce 64% Fe concentrate, to be used as sinter feed for the ASCL
blast furnaces and 68% Fe for the DSC pelletising/ DRI processes. At such rates of
beneficiation large quantities of tailings will be produced.
The Itakpe iron ore contains mainly haematite, magnetite and quartz and is mined at a site
to the north of Okene in Kogi State, which is located in the Middle Belt Region of Nigeria.
Its typical chemical composition as determined by X-ray fluorescence is shown in
Table 5.1.
TABLE 5.1 – CHEMICAL COMPOSITION OF NIOMCO IRON ORE
Mineral Fe2O3 Fe3O4 SiO2 CaO Al2O3 MgO TiO2

Composition 30.88 19.05 42.05 1.25 3.2 0.37 0.20
McLellan has not yet had the opportunity to visit the NIOMCO facilities and further details
of the iron ore mining operation will be given in Phase 2 of the Due Diligence Work.
5.3 NIOMCO Iron Ore Operations
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The Fe content of the NIOMCO super-concentrate is extremely important in relation to the

DRI and EAF processes. High silica content of the iron ore pellets leads to the possibility
of increased clustering in the DRI process and significantly increases in the use of lime
and power consumption in the EAF. It also leads to increased liquid steel yield loss in the
EAF process. These are important factors in relation to the overall manufacturing cost.
The current levels of silica in the iron ore dispatched to DSC are too high to efficiently
operate the electric steelmaking process. Therefore, extra beneficiation is required.
GSHL stated that it has a plan to reduce the silica content significantly. However, review
of the detail as to how this will be done will be subject to further investigations during the
Phase 2 Due Diligence stage. At present, reduction of the silica load to the SMS is being
undertaken by blending with Brazilian ores together with increasing the proportion of
ferrous scrap charged to the EAF.
GHSL reported that a super-beneficiation plant is very near completion and a dispute
between the supplier (Koch) and the FNG had so far prevented completion. It is reported
that the plant will have a capacity of 540 kt/y and will produce low silica fines of 67% Fe.
The progress of this plant also will feature as one of the Phase 2 Due Diligence
investigations.
5.4 Imported Iron Ore
Currently DSC has been consuming a proportion of CVRD ore in its DRI process. This is
because the silica content in the NIOMCO fines is too high and the Brazilian CVRD pellets
and lump ore contain have considerably lower levels of silica.
McLellan understands that small shipments - that are capable of being landed at the jetty
-are also being transhipped from other Global Steel operations.
5.5 DSC Iron Ore Reception and Jetty Facilities
The logistics of handling the necessary wide range of raw materials is a complex subject
and is examined in a later section of the Due Diligence Visit Report. However, the port
infrastructure is described below.
DSC has a riverside jetty situated on the edge of the Works site, which is some 75 km
upstream from the coastal entrance to the Warri River and Escravos Bar. Draft limitations
at the DSC 30,000 dwt (dead weight tonnage) are claimed to be such that the largest
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5-3
vessels that can be berthed irrespective of any technically and commercially feasible
dredging operations. Draught alongside the jetty is claimed to be some 6.5 - 7m without
tide and around 9m with tide.
The jetty is 800m long and is equipped with two bulk material unloaders, each using 25t
grabs feeding an associated conveyor system. It is reported that a single grab unloader
has the capacity to discharge one 15,000t vessel in a single day. The jetty is also
equipped with two travelling gantry cranes, each of 25t capacity for handling billets and
bundles of finished products. Two 24t slewing cranes are also available for general
duties. The facilities appear adequate to service the plant for the needs of current and
original design capacity, however the plant may need further enhancement to meet the
needs of the expanded plant capacity. Further detail is given later in the logistics section
of the Report.
5.6 Ore Storage and Handling
The ore stockyard has a storage capacity of approximately 900,000t and is divided into
sections for the storage of discrete materials. The yard is equipped with two MAN
stacker-reclaimers, each of 2,500 t/h capacity (stacking) and 700 t/h (reclaiming).
5.7 Limestone
Lime is required for the steelmaking process to flux the siliceous DRI pellets and to create
the requisite metallurgical conditions. Limestone and dolomitic limestone are the feed
materials to produce burnt and hydrated lime and burnt dolomite.
Limestone is procured locally from a number of domestic sources, currently from a quarry
near the NIOMCO site. However, GHSL states that it is interested in developing a
limestone site at Calabar in the southeast of the country.
Limestone quality appears adequate for present lime making operations but contains
moderate amounts of silica. Improved sources of supply, such as the limestone from
Calabar, would be required for the expanded lime making capacity. This requires further
investigation during the Phase 2 Due Diligence Process.
5.8 Ferrous Scrap
DSC has been operating its electric arc furnaces with a feed of around 40% purchased
ferrous scrap and 46% DRI. The balance of the required feed has been internally arising
scrap in the form of arc furnace ‘skulls’ and rolling mill returns.
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5-4
Nigeria has an export ban on scrap, which means that the cost of domestically arising
scrap is considerably cheaper than world benchmark prices. The average cost of
externally procured scrap in July 2007 was US$/200.4/t and the average July 2007 scrap
price FOB Black Sea (Metal Bulletin) by comparison was some US$ 280/t.
It is unlikely that much scrap is smuggled illicitly out of Nigerian, as most of its neighbours
do not have steelmaking industries.
It is reported that there will be a good supply of local steel scrap until the increased
capacity of the DSC plant expansions come into effect. At that stage DSC plans to import
a proportion of its ferrous scrap requirements.
5.9 Other Consumables
Other spare parts and consumables, such as heavy equipment items, electrodes and
refractories, are imported. In the short term these items are discharged at Lagos Port and
transferred to Warri by road. In the future DSC is considering shipment to its own pier
facility or to some other nearby port.
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SECTION 6
UTILITIES AND ENERGY PROCUREMENT

6-1
SECTION 6
UTILITIES AND ENERGY PROCUREMENT
6.1 Introduction
DSC purchases power and natural gas from external suppliers, but is self sufficient with
regard to water, compressed air, oxygen and other inert gases. This section of the Due
Diligence Report examines only the supply and contractual arrangements. Section 12 of
the Report comments on the physical aspects of the utility and ancillary systems.
6.2 Electrical Power
Currently electrical power is supplied by PHCN (Power Holding Company of Nigeria) -

formerly known as NEPA (National Electric Power Authority) - by two high voltage
overhead transmission lines. The 330 kV lines feed into the DSC main +20A electrical
station. There are two power stations in close proximity to Delta Steel, namely Sapele and
Ughelli, located 30 km and 20 km away respectively.
GSHL states that it is in the final stages of acquiring Sapele Power Station. This power
station has 6 steam turbines (each 720 MW) and 4 gas turbines (300 MW). Further
analysis of the detail of the acquisition or potential contracts has not yet been made by
McLellan at this early stage of Due Diligence. Should GSHL acquire this power plant, it
would supply power to DSC and also feed directly into the regional electricity grid.
If this acquisition proceeds power to the works would be supplied mainly by Sapele and
Ughelli Power Station would become a standby supply.
According to DSC’s monthly accounts the cost of electricity is around US Cents 7.3 per
kWh. McLellan considers this to be around world average for such a steelmaking facility.
There are shortages of electrical power in Nigeria. However, DSC claims that the Delta
Region does have sufficient power and, as yet, there have been no restrictions or major
interruptions to the power supply.
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6-2
6.3 Natural Gas
DSC receives natural gas from NGC (Nigerian Gas Company Limited). NGC currently
operates eight supply systems including the Sapele and Aladia system which feeds DSC.
DSC states that NGC treats large consumers of natural gas, such as the steel industry, as
preferential consumers.
GSHL states that it has agreed in principle a 20 year supply contract for natural gas and
the only remaining outstanding open point is agreement over the cost of the gas.
The current cost of natural gas according to July’s financial accounts is US$ 0.0081/Nm³.
For comparison the 2006 prices for natural gas in Ukraine and Germany (at the border)
were US$ 0.095 /Nm³ and US$ 0.28 /Nm³ respectively. Therefore the current price can be
classed as extremely low cost.
GSHL states that in future the cost of natural gas may rise to US$ 0.04/Nm³ - a fivefold
increase, but still considerably cheaper than most other natural gas consuming steel
industries.
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SECTION 7
PELLETISING PLANT
7-1
SECTION 7
PELLETISING PLANT
7.1 Process Description
The Pellet Plants consists of two main parts: the material preparation area where the raw
material (iron ore fines) enter the plant and are processed to produce wet, so called “green
pellets” and the induration section where the green pellets are hardened to impart the
physical and metallurgical properties required by the end user of the pellets (the DR Plant).
Figure 7.1 is an overview of the basic pellet making process at DSC.
FIGURE 7.1 – OUTLINE OF PELLET MAKING PROCESS
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7-2
7.1.1 Dosing and Mixing
Carefully proportioned additives and binders are required to be combined with the iron ore
to form good quality pellets. The preferred binder is high grade bentonite and, typically,
some 7 kg/t pellets will be added to the mix.
7.1.2 Induration
The green pellets are hardened on a straight grate indurating machine, as shown below in
Figure 7.2.
FIGURE 7.2 – PELLET MAKING – INDURATION ZONE
7.1.3 Pellet Coating
The Pellet Plant designed to produce Direct Reduction grade pellets. A system to apply a
coating of refractory material to a proportion of the pellets at the pellet plant is normally
part of the plant design. This increases the resistance of the pellets to clustering in the DR
shaft and allows the DR Plant to maximise output. As the NOMCO pellets are extremely
siliceous, the pellets at DSC require coating with (basic) hydrated lime/dolomite slurry.
Spraying the warm pellets with this slurry improves the adhesion of the coating, as well as
providing a form of dust control.
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7-3
7.2 Site Visit – Initial Assessment
The DSC Pellet Plant, which was supplied by Lurgi, has a design capacity of around
1.5 Mt/y of oxide pellets. The plant has two ball mills feeding a single indurator and is
reported to be currently producing 32.5 kt/month per balling line.
At the time of the visit one of the two ball mills was found to be shutdown for an extended
period due to a main bearing failure. DSC stated that it had taken some time to procure a
large bearing and this replacement was now at Lagos port. However, at the time of the
McLellan inspection, the pellet plant was not in operation due to interruption in the supply
of hydrated lime.
In July 2007, pellet production was 32.5 kt (around 51 t/hr) and the delay statistics show
that the main problems were as follows: -
 Equipment failure losses 39.57 hours

 Shutdown loss 8.92 hours
 External loss 275.4 hours
 Process and operation losses 17 hours
It is assumed that the ‘External Loss’ of production time relates to problems beyond the
control of the Pellet Plant, such as lack of raw materials or awaiting delivery of essential
spare parts, such as the ball mill main bearing, and also for plant stoppages, such as the
industrial dispute over pensions which is further commented upon later in the report.
In general, the plant appeared to be in good working order and for the nature of the
process the housekeeping standard was high. McLellan has requested operating statistics
for the actual year to date and also the annual business plan for the plant. At the time of
writing this information has not been forthcoming.
The current operation of the Pellet Plant is well below design capacity. This shortfall in
production utilisation is due to a number of reasons, as described below.
First, as stated above the Pellet Plant has only one operational ball mill. The replacement
bearing that has now arrived in Nigeria will soon remove this constraint. Other reasons for
production shortage include production planning reasons. The meltshop is currently a
bottleneck for the plant and the DRI plant situated between the Pellet Plant and the SMS in
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7-4
the production flow, is only working on one module. This single module operation is
enough to supply the SMS with DRI and also produce DRI for external sales.
In the near future DSC plans to raise the capacity of the Pellet and DRI plants and this
should produce an improvement in Pellet Plant throughput and utilisation. The high silica
content of the NIOMCO ore is another factor in current pellet plant production. As the local
ore content is too siliceous for efficient SMS operation, the DRI plant is also fed with
imported pellets and lump iron ore in order to improve the overall DRI blend for the SMS.
DSC plans to upgrade the pellet making facility to increase the overall capacity to 2.2 Mt/y.
Further details of this expansion are given in Section 14 of the Report.
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SECTION 8
LIME PLANT
8-1
SECTION 8
LIME PLANT
8.1 Introduction
The Lime Plant, originally built by Lurgi, consists of a 70m long natural gas fired rotary kiln.
The capacity of the plant is rated at 66,000 t/y of burnt lime for use in the steelmaking
operation. The plant has the facility to convert a proportion of this output to hydrated lime,
which is required in the coating of pellets for DRI operations and also for water treatment
purposes. Table 8.1 shows the lime plant design basis.
TABLE 8.1 – LIME PLANT BASIS OF DESIGN
Parameter Design
Rated Capacity 66,000 t/y
Availability 90.4%
Working Days/y 330 days
Working Schedule 24 Hours
Input Limestone 0 - 60 mm
Limestone is fed into the process by wheeled loader. The 600 mm product passes through
screening and crushing sections and limestone is charged into the rotary kiln via a weigh
belt system. The kiln is fired by natural gas using a central burner. The kiln operates at an
angle of 25° and calcined lime is removed from the other end of the kiln.
Burnt lime leaves the kiln, is cooled to about 80 °C and ground to less than 1 mm. The
ground lime is then transported through a bucket elevator into the storage bins. Some of
the burnt lime is ground further and fed to the hydrating machine to produce hydrated lime.
McLellan did not have the opportunity or time to visit the lime plant during its visit and
intends to observe plant operations more closely during the Phase 2 Due Diligence work.
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SECTION 9
DRI PLANT
9-1
SECTION 9
DRI PLANT
9.1 Introduction
The DRI plant has two similar Midrex modules of the 600 Series. Currently, one module is
working and the second remains on standby due currently to there being insufficient raw
materials (pellet plant reduced capacity because of the ball mill bearing problem) and also
the present SMS demand is relatively low.
The one module has been producing DRI for two markets. The first market is the internal
demand for the DSC steel melt shop (SMS), for which DRI is produced from a blend of
NIOMCO and imported ores (CVRD, Brazil). This 70:30 NIOMCO: CVRD blend allows a
DRI product with lower silica to be produced. The DSC DRI Plant also produces blast
furnace grade DRI for export markets.
9.2 Background
Module No 4 was commissioned in 1982 and Module No 5 was brought on stream one
year later. The design of each plant is for 320 days operation at 60 – 65 t/h and DSC
states that the plants have achieved this rate of production in the past. However, resulting
from chronic lack of funding, Module 5 was stopped in 1992 and Module 4 terminated
production in 1996. Module 4 was then rehabilitated after the take-over by GIHL and was
re-commissioned in May 2006. Module 5 was brought on stream later and Module 4 is
now stood by and is awaiting re-commencement of operation when pellet supply and DRI
consumption allows.
The current rate of operation is below the original design status because of leakage
problems that had previously occurred in the feed gas preheater system. There are two
units per module and around 40% of these tubes are blocked off. Consequently, lower
feed gas temperatures lead to lower production rates and the current estimated rate of
production is 55 – 60 t/h.
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9-2
DSC states that an order for replacement tubes was made around 2 – 3 months ago and
when fitted the modules will be able to attain design capacity.
9.3 DRI Shipments
DSC has made around 10 shipments of DRI for blast furnace export markets. DRI is
pyrophoric in its nature and can self combust. The surface of the pellet is extremely
porous and easily oxidises giving rise to exothermic reaction. To prevent this potentially
hazardous situation, the DRI pellets are passivated (coated). Nevertheless, careful
procedures are necessary during the stocking and loading of ships. After loading, ship
hatches are sealed and purged with nitrogen.
9.4 DRI Operations
In July 2007 the plant produced 12,083t of blended DRI for consumption at DSC and a
further 16,211t of DRI produced from NIOCO ore for export. The cost of production was
US$126.73/t for NIOMOC based ore and US$160.81/t for the blended DRI for internal
consumption.
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SECTION 10
STEELMAKING PLANT (SMS)

10-1
SECTION 10
STEELMAKING PLANT (SMS)
10.1 Introduction
The Steel Melt Shop (SMS), which includes the steelmaking and continuous casting
operations, is regarded as the most critical part of an integrated steelworks such as DSC.
The SMS at Delta Steel was commissioned in 1982. The plant was designed and supplied
by a reputable manufacturer and has an annual nameplate capacity of 1 Mt/y.
The steelmaking and casting units supplied were based on the latest technology available
at the time of installation and consisted of four 100t electric arc furnaces (EAFs) and three
six strand billet Continuous Casting Machines (CCMs).
Unfortunately, the ramp up in production under previous management did not progress
well and by 1985 the SMS had only attained 25% of installed production capacity.
Thereafter, despite efforts to improve operations, production at the Works was finally
suspended in1997.
The SMS remained out of operation until it was taken over by GSHL in February 2005.
During the shutdown period, whilst significant developments in steelmaking and
continuous casting technology were emerging elsewhere in the world, the plant was
cannibalised.
The condition of the plant at the time at the time of the takeover was as follows:-
 EAF 1 - Totally cannibalised

 EAF 2 - Significantly cannibalised
 EAF 3 - Dismantled (partly converted to Ladle Furnace)
 EAF 4 - Furnace dismantled, in preparation for new water cooled shell
and roof installation
 CCM 1 - Totally cannibalised
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10-2
 CCM 2 - Significant refurbishment required

 CCM 3 - Significant refurbishment required
10.2 Summary of Status and Recent Events
A summary of developments and status of SMS production units following GSHL takeover
in February 2005 is shown below: -
 EAF 1 Remains out of action, pending the completion of an initial

refurbishment programme (75% complete). Further
modernisation is also required.
 EAF 2 Extensive refurbishment complete by May 2005.

Commercial production resumed in December 2005.
Furnace remains essentially of 1980’s design and requires
further extensive modernisation.
 EAF 3 Converted to a Ladle Furnace, which was commissioned in

June 2006.
 Ladle Furnaces Provides a link between the EAF and CCM to increase EAF
production and optimise and homogenise steel temperature
and chemistry prior to casting. This technology was not
readily available in 1980’s.
 EAF 4 New water cooled shell and roof installed July 2006. Water
cooled shell and roof technology reduces refractory
consumption and increases EAF productivity. This
technology requires to be introduced on all the EAFs at DSC.
This technology was only starting to emerge in the 1980’s).
 CCM I This unit remains out of action, pending the completion of an

initial refurbishment programme (75% complete). Further
modernisation is also required.
 CCM 2 Successful hot trials were carried out three months after extensive
refurbishment in May 2005. Commencement of commercial
production started in December 2005.
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10-3
 CCM 3 Refurbished and commissioned in July 2006
 Support Systems Power supply systems, raw materials charging, oxygen

lancing, cooling towers, scrap yard have all been revamped
and made functional.
10.3 Summary of Original SMS Equipment Design and Production Capacity
The original Equipment Design Data is shown below:
Electric Arc Furnaces (EAF)

Number of AC furnaces 4
Nominal capacity of each furnace 110t
Furnace diameter (shell) 6,400 mm
Shell / Roof Lining Fully refractory lined
Furnace Design Launder Spout (i.e. not EBT)
Oxygen Lancing Hand lance
Oxy-fuel burners None
Mast Regulation Control Winch drives (i.e. not hydraulic)
Transformer capacity 60 MVA
HV System 33 kV
Charge composition (DRI / Scrap) 80% / 20% by weight
Melt down time 100 min
Electrical Consumption (melt down 15500C) 530 kWh/t
Quality of steel DIN 17 100 and DIN 17 140
Carbon content between 0.2 – 0.5%
Capacity of ladle (nominal) 110t
Capacity of ladle (maximum) 120t
Continuous Casting Machines (CCMs)

Machine type S 13–5
Number of machines 3
Number of strands/machine 6
Number of tundish cars/machine 2
Cast Billet range 100 – 130 mm square
Machines equipped to cast 120 mm square
Casting radius 5m
Machine centre line distance 36/ 36/m
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10-4
Strand centre line distance 900/900/1100/900/900 mm

Capacity of ladle (nominal) 110t
Capacity of ladle (maximum) 120t
Cut off lengths 12m
Strand cutting mechanical shears
Billets discharge motorized roller tables, cross
transfer mechanism and turn
over cooling bed.
The SMS building is of steel lattice design and comprises:
Scrap Bin bay (10 x 144m) 1,440 m2

Electric furnace bay (26.5 x 240m) 6,360 m2
Casting (Teeming) bay: (22.5 x 222m) 4,995 m2
Continuous Casting bay (31.75 x 222m) 6,993 m2
Storage bay 1: (33.0 x 222m) 7,326 m2
Storage bay 2 :(33.0 x 222m) 7,326 m2
Repair workshop: (18 x 36m) 648 m2
With approx. 35,000 m2 covered area
The bays are covered and faced with trapezoidal sheet metal, and are open up to +5.5m
for natural ventilation. Ventilating structures can be provided on the roof and spaced
depending on the generation of heat.
10.4 Original Design Production Capacity
The original design statistics are shown below: -
Electric Arc Furnaces (EAFs)

Total time available (365 days) 8,760 hours
Time for EAF vessel change 400 hours
Time for EAF roof change 164 hours
Hot repairs / cleaning (8 hours/week) 416 hours
Waiting times approximately 4% 336 hours
Holidays approximately 6 days 144 hours
Production time or 304 days/year 7,300 hours
Tap to tap time per furnace 3 hours (180 min)
Number of heats per day/furnace 8 heats
Average heat weight – 250,000/8x304 103t
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10-5
Continuous Casting Machines – CCM
Total time available (365 days) 8,760 hours

Stoppage times – change of tundish, etc 264 hours
1 repair shift per week 384 hours
Average down time – 10% 812 hours
Production time 304 days/year
Total number of cast per annum:
8 heats/furnace/day x 4 furnaces x 304 days 9,728 heats
Number of casts per annum / CCM 3,243 heats
Annual production of liquid steel 1,000,000t
10.5 Description of Current SMS Operation
The following paragraphs describe DSC’s steelmaking and casting operations.
10.5.1 Supply of Raw Materials
Steelmaking requires a number of raw materials and process consumables. The main
items are described below:-.
Direct Reduced Iron (DRI)
DRI produced by the two Direct Reduction Modules is transported by means of belt
conveyor system to four storage bins outside the SMS. The control of the DRI charging
equipment for the EAFs is located in furnace control rooms 1 and 2. The control of the
dedusting plant is carried out locally and is monitored from the control rooms.
Scrap Supply
Ferrous scrap required for the steelmaking operation is mainly purchased. It is sourced
from the domestic market and delivered by road. Scrap feed also includes internally re-
cycled scrap from the SMS and rolling mill operations.
A hydraulic shear and compactor is available to process light and oversize scrap. The
external scrap operation is controlled from a control room situated above the shear
hydraulic station. Two special overhead cranes have been provided for sorting, transport
and loading. The loaded scrap buckets are transported to the EAF charging bay by
special purpose road vehicles via a weighbridge.
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In order to control steel temperature, selected scrap (especially return scrap from rolling
mill) is cut into small pieces, up to approx. 200 x 200 mm size, by a shear and then used
as coolant scrap.
During the site visit large quantities of steel skulls were awaiting processing and recycling
and were observed in various locations around the Works. This is indicative of the
operational problems currently being experienced.
Lime Supply
A lime calcination plant is available to prepare the lime required for slag formation during
the steelmaking process. However, the lack of lime is currently having both a direct and
indirect adverse effect on SMS operations. Comments on the lime making operation are
presented in Section 7 of this Report.
10.5.2 Steelmaking Operation
The original steelmaking and casting design concept of the 1 Mt/y steelmaking shop
consisted of four EAFs and three 6 strand billet casting machines. This is no longer
applicable at DSC.
The current SMS operation is based on two EAFs, one ladle furnace and two CCMs. EAF
3 has been converted to a ladle furnace and EAF 1 together with CCM 1 have been out
operation since the Plant was shutdown, albeit DSC plans to bring both of these units back
into service within then next 4 months.
Table 10.1 provides a summary of the actual performance of the SMS compared to budget
for the period January to July 2007. The current actual performance is also compared with
the original design ‘nameplate’ specification.
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TABLE 10.1 – SUMMARY OF LIQUID STEEL AND BILLET PRODUCTION – 2007
No HEATS LIQUID STEEL BILLETS
PLAN ACTUAL % PLAN ACTUAL % PLAN ACTUAL % YIELD
January 247 172 70% 26,445 16,658 63% 25,916 14,534 56% 87%
February 242 173 71% 25,927 16,934 65% 25,408 15,933 63% 94%
March 312 236 76% 33,378 22,161 66% 32,711 20,359 62% 92%
April 256 193 75% 27,397 17,793 65% 26,849 16,002 60% 90%
May 312 226 72% 33,378 21,913 66% 32,710 16,381 50% 75%
June 230 147 64% 24,605 16,343 66% 24,112 14,768 61% 90%
July 359 183 51% 28,488 18,358 64% 27,918 16,464 59% 90%
TOTAL 1,958 1,330 68% 199,618 30,160 65% 195,624 114,441 59%
Monthly
280 190 68% 28,517 18,594 65% 27,946 16,349 59% 88%
Average
Daily
11 190 68% 1,126 734 65% 1,103 645 59%
Average
Heat
102 98
Size
The Table shows that the average liquid steel and billet production is less than
20,000 t/month, which equates to around 24% of design capacity. Figure 10.1 also
illustrates that the month to month development of the shop shows little improvement.
From these statistics and general observations on site, McLellan considers that stepwise
improvements in performance will probably not occur until EAF 1 and CCM 1 are
reinstated or when major equipment developments are achieved.
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FIGURE 10.1 – SUMMARY OF LIQUID STEEL AND BILLET PRODUCTION – 2007
35,000 100%
PLAN
ACTUAL
30,000 YIELD
95%
25,000
90%
Billet Tonnes
20,000
Billet Yield
85%
15,000
80%
10,000
75%
5,000
0 70%
January February March April May June July
Although McLellan considers that DSC has done well to restore operations, Figure 10.1
indicates a significant shortfall in actual production compared to plan. Figure 10.1 also
shows an increasing trend in billet production in the first quarter of the year, but this has
not been sustained for the period from April to July 2007.
The SMS has a number of problems such as with charging lime and excessive refractory
wear. These are problems that can be solved only with the planned design changes.
However, unless the plant increases additional capacity (EAF 1 and CCM 1) or solves
these problems with the capital developments planned, it is likely that production will
continue at current levels.
The low CCM yield, of around 90%, is significantly lower than expectations. McLellan
would expect a billet yield to be in the order of 98% in a modern operation. The low yield
is also indicative of the operational problems currently being experienced at both steel
plant and continuous caster.
Although the current deficit is more pronounced when compared to the original design
specification of 1 Mt/y, this is partly attributable to the reduction in the number of
steelmaking and casting units now in operation.
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10.5.3 Factors Affecting Steelmaking Operations
McLellan considers that an Integrated Steelworks such as at DSC could be adapted to

produce in excess of 2 Mt/y. However, DSC’s imminent challenge is to bring the plant
back up to near design capacity. Adaptations to equipment and process will help DSC to
overcome some of the current barriers. This is further explained below.
The significant shortfall in billet production relative to the current design capacity is
considered to be mainly due to:-
 Raw materials – Availability and quality

 Excessive unplanned delays
The main areas are attributable to the following:-
a. Raw Materials
 Lime Production – McLellan observed that the SMS and other DSC plants on
site have experienced stoppages due to shortage of lime supply. Shortage of
lime is an operational problem that is relatively easily avoided and has been
brought to the attention of DSC management team
 Pellet Production – Pellet production has been limited because of the

availability of ball mills. The NIOMCO ore also contains too much silica which
is detrimental to the steelmaking process
 DRI Production – DRI is produced from DSC pellets and silica levels are
extremely high even when taken account that the NIOMCO ore is blended with
Brazilian ore.
Steelmaking performance in terms of productivity and yield is much a function of the

quality of the process inputs. For example high silica in the pellets finishes up as high
silica in the DRI and excessive silica has to be fluxed by adding additional lime. The ratio
of lime to silica is important in two main regards.
First, silica and lime are the main components of the slag and the CaO/SiO2 ratio is
important from a metallurgical perspective and also in relation to slag viscosity. Slag that
is either too acidic (CaO/SiO2 low) or too basic (CaO/SiO2 high) are very aggressive on the
EAF refractory. DSC is now experiencing high refractory wear in the EAF.
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In order to maintain the correct basicity, lime must be added to the EAF. This is usually
undertaken dynamically without the need to stop the furnace. However, the system at the
DSC SMS is not working and this necessitates periodic stops in EAF operation in order to
add lime. It also leads to compromises with the SiO2/CaO ratio which in turn leads to
excessive refractory wear.
Finally, raised lime and silica increases the EAF slag volume; increased slag volume leads
to reduced yield and high electricity consumption. In July 2007, for example, the target
EAF yield was 85% but the actual yield was only 79%. Electricity consumption was
903 kWh/t against a standard of 700 kWh/t.
Hence, DSC has challenges to improve the availability of raw materials such as lime but
also to reduce the silica levels in the NIOCO ore. DSC also needs to establish a method
of dynamically feeding lime into the EAF.
b. Excessive SMS Unplanned delays:
 Quality of raw materials – as defined above
 Poor equipment design – as defined above with respect to lime feeding but
also in many other respects.
 Poor equipment availability / preventative maintenance
 Need to improve SMS Process Route
 Need to introduce new technology
 Need to improve employee skill levels and overall shop momentum
Examples of the major delays currently being experienced are as follows:-
Operational
 Furnace shell refractory repairs

 Waiting for casting machines
 Low sequence rates
 Slag bay cleaning
 Decarburisation (refining)
 Electrode change
 Pourbacks
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Mechanical
 Roof problems
 Electrode Problems
Electrical
 Electrode arms not coming down
 Electrode arms winch drive motors
All of the above delays are typical of a SMS that requires modernisation.
10.5.4 Fume Collection System
The SMS is equipped with two baghouse fume collection plants, one plant covers
EAFs Nos 1 & 2 and the second caters for EAF 4 and the ladle furnace (formerly EAF 3).
Fumes are directly extracted from a fourth hole in the roof of each furnace. However, no
secondary (canopy hood) facilities have been provided. Secondary fume extraction is
common practice throughout modern EAF steelmaking operations.
Each baghouse fume collection plant consists of:
 Water-cooled roof elbow

 Non-water cooled gas ducts
 Heat exchanger
 Baghouse
 Fan station
 Gas discharge chimney
 Dust collection and discharge facilities
Baghouse dust is recycled to the Pellet Plant.
During the visit the following areas of concern became apparent:-
 Heavy discharges of dirty fume from the chimney were observed, indicating that
the baghouse was not working properly.
 In order to collect the large volumes of dirty fume created during furnace
charging and tapping and avoid fugitive emissions escaping from the shop, it is
recommended that secondary extraction facilities should be retro-fitted.
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 In order to facilitate fume plant maintenance during EAF planned down periods,
dedicated furnace baghouse facilities are preferred
 McLellan considers that the capacity of the existing fume collection systems is
unlikely to be sufficient to handle the proposed expansion scheme and
additional provision will require to be made in the Cap-Ex Budget. This has
been pointed out to DSC and discussed during the site visit.
10.5.5 Existing Ladle Treatment Facilities
In the absence of sufficient ladle furnace capacity, DSC utilises two less effective movable
nitrogen stirring station plants and a temperature measuring stand to homogenise ladle
steel chemistry and temperature. Unfortunately this technique invariably results in
stratification within the ladle which results in casting machine problems and aborted heats.
10.5.5 Continuous Casting Machines (CCM)
The installation comprises three identical machines. Each machine is a six-strand billet
caster, each strand being similar in construction and operation.
The main structure of each machine provides support for the casting platform, tundish
preheating stations, tundish cars and moulds. The foundation of each machine provides
support for the ladle turret, emergency ladle, straighteners, roller tables, shears and
discharge equipment as well as flumes for strand cooling water. Two tundish cars are
provided for each machine, a pre-heat station provided for each car. Slag boxes are
positioned at the casting station to receive hot metal or slag as required during the casting
operation. The mould is mounted on a pivoted support arm that is attached to the
oscillating mechanism mounted on cross beams below casting floor. A main control panel
giving control of the casting operations together with alarm and failure indication is
positioned in the control room at the casting floor. Local control of the cast at each mould
is provided by a control box located on an arm positioned at each strand. Access to the
main and intermediate levels is by stairways having suitable handrails. An integrated steel
walled enclosure forms the cooling chamber which houses the arc shaped six strand
guides of one machine.
A straightener assembly, mounted at ground level, provides the drive and straightening
function for each strand. It also provides the drive for the dummy-bar when re-stranding
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10-13
the machine. A non-driven intermediate roller table supports strand and dummy bar
respectively.
In front of the shear a pinch roll unit with a driven top roll is provided to drive the end of the
strand or dummy bar. A shear is used to cut the strand into billets of a pre-determined
length. A discharge roller table with disappearing stops is positioned in between the shear
and cooling bed. A receiver houses the dummy bar alongside the roller table. A transfer
assembly to collect billets is used for cross travel, to the turnover bed. This mechanical
transport provides a turning action to obtain the even cooling on the entire length of the
billets. A roller table drives the billets into the dispatch bay and a pusher assists for
storage onto the cooling bank.
10.5.6 Summary of SMS Operations
The steelmaking shop is clearly the heart of the entire DSC operations. In many ways it is
the central and most important department of the entire Nigerian operation, as it also
supplies billets to ASCL. Nigeria has to import significant quantities of bars and billets,
and there is clearly a market for long products.
McLellan accepts that good progress has been made but recommends that the SMS
should be treated as priority area for reinitiating the drive towards design capacity.
First, there are problems with availability and quality of raw materials that need resolution.
Secondly, there are operational and maintenance items that can be resolved with the
requisite attention and effort. Finally, there are equipment issues and design problems
that need resolution. McLellan considers that if these challenges can be overcome the
extra production pushed through the shop will also drive other downstream and upstream
departments.
DSCA has plans to develop the plant to produce 2.4 Mt/y and these are outlined in
Section 14 of this study.
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SECTION 11
ROLLING MILL
11-1
SECTION 11
ROLLING MILL
11.1 Introduction
The rolling mill is a conventional light sections and bar mill. Although the mill has the
capability to roll sections, for market reasons it mainly produces bar.
11.2 Rolling Mill Design and Technical Data
The design basis for the rolling mill is shown below in Table 11.1.
TABLE 11.1 – ROLLING MILL DESIGN PARAMETERS
Parameter Design basis

Rated Capacity 0.3 Mt/y
Maximum Design Capacity 0.32 Mt/y
Working Days 278 days
Availability 76.11%
The reheat furnace is a pusher type furnace and is fired by natural gas. Its throughput
capacity is 85 t/h and discharge temperature is 1,200 °C.
The mill rolling speed range is between 3 and 15 m/sec. However, the mill cannot always
run reliably at high speed because of problems with its analogue drive units.
The rolling mill is fed with billets of dimension 120 x 120 mm and the product range is
shown in Table 11.2.
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TABLE 11.2 – ROLLING MILL PRODUCTS
Product Range Tolerance

Rounds 12 – 50 mm DIN 1013
Squares 12 – 50 mm DIN 1014
Flats 5 x 20 – 12 x 25 mm DIN 1017
Tees 20 – 60 mm DIN 1024
Equal angles 20 x 3 to 65 x 11 mm DIN 1028
Unequal angles 40 x 30 x 3 mm DIN 1029
65x 50 x 9 mm
Channels 40 x 20 – 100 x 50 mm DIN 1026
I – Beam 80 and 100 mm
Finished Lengths 6 – 12 m
The mill consists of 14 horizontal stands and 4 vertical stands. Flying crop shears and
cobble shears are sited in front of the horizontal stands H6 and H12. Snap shears are also
sited in front of the horizontal stands H6, HH 16 and H18 in case of cobbles or other
malfunctions. The finishing process begins at a 75m rake type cooling bed. The mill has
straighteners for use during rolling structural sections and a cold shear and cold saws.
The mill has operated at well below capacity in recent months because of a shortage of
billets emanating from low billet supply from the SMS and also billet transfers to ASCL.
There is a problem with one of the mill drive spline shafts of which a replacement is on
order and the mill has been stabilise at operating at 70% of normal speed. The mill team
appear proactive and have identified a number of enhancements and upgrades to bring
the mill back to design capacity. The mill team state that many of these improvement
items have already been ordered.
A thermal treatment line designed to enhance the product mechanical properties is in the
final stages of commissioning. The system is awaiting low temperature hot metal
detectors. This system will allow DSC to further differentiate itself from other domestic
competitors in terms of production of quality products.
The mill has rolled 1,500t in a single day in recent months and McLellan considers that
with the planned enhancements the rolling mill should be capable of meeting original
design capacity.
Rolling mill yield is currently 96.5% and the target is 97 – 98%. This should improve as the
rolling mill picks up momentum from an improved billet supply.
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The main enhancements to the rolling mill are in terms of final stages of rehabilitation and
major improvements to the drive automation and automation systems. These post
expansion enhancements are further described in Section 14 of this report.
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SECTION 12
UTILITIES AND ANCILLARIES

12-1
SECTION 12
UTILITIES AND ANCILLARIES
12.1 Introduction
This section of the Due Diligence Study considers the utility and ancillary aspects of the
DSC plant.
12.2 Electrical Power
Currently electrical power is supplied by PHCN (Power Holding Company of Nigeria) by

two high voltage overhead transmission lines. The 330 kV lines feed into the DSC main
+20A electrical station. Two power stations in close proximity to Delta Steel feed the main
DSC electrical station.
Electrical station +20A is a modern installation and has SF6 gas insulated switchgear with
full metal cladding. The high voltage switchgear distributes energy to four 140 MVA
transformers. These transformers transform the voltage from 330 kV to 33 kV.
The 33 kV switchgear distributes power to the EAF transformers. Power is further
distributed to other plants via 13 15 MVA, 33/6.6 kV transformers. From these units
energy will be further distributed by 6.6 kV switchgear and transformed to 380V where
necessary.
Compensation equipment is connected directly to the 33 kV switchgear and reduces

voltage variation caused by the fluctuating current drawn by the arc in the EAF.
McLellan considers the existing system is robust enough to allow the DSC Works to
achieve design capacity. However, further capacity enhancement of the electrical supply
system will be required to allow DSC expansion plan to 2.4 Mt/y to be achieved. This is
further explained in Section 14 of this Report.
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12.3 Natural Gas
Natural gas is supplied by the Nigerian Gas Company at a rate of 150,000 Nm³/h at a
pressure of 11 to 15 bar. Natural gas is piped directly to the Works and pressure is
reduced at site via a reducing station. The distribution of natural gas to the various
plants at the Works is shown below in Table 12.1.
TABLE 12.1 – DSC NATURAL GAS SUPPLY
Plant Supply Nm³/h

Pellet Plant 25,000
DRI Plant 105,000
SMS 5,000
Foundry 1,500
Lime Plant 5,000
Central Lab 500
TOTAL 142,000
12.4 Cryogenic Plant
The single stream plant, originally supplied by Linde-Korf, has a rated capacity of
2,260 Nm³/h of gaseous oxygen, 2,500 of gaseous nitrogen and 45 Nm³/h of argon. This
80 t/d plant produces both oxygen (99.5%) and nitrogen (99.9%) at high levels of purity.
The plant is considered adequate to supply oxygen and nitrogen mainly to the SMS under
current operating conditions. However, extra capacity will be needed fro the DSC
expansion plan for SMS to be achieved. Further details of this expansion are given in
Section 14 of the Report.
12.5 Water Supply and Water Treatment Plant
The water table in the Warri region is high and water is extracted through five boreholes.
Each well has a capacity of 250 m³/h. It is explained in Section 14 that three further
boreholes are required to support the expansion plan.
McLellan did not have time to inspect the water treatment facilities because of the short
duration of the visit. However, McLellan understands that the discharges of suspended
solids from the plant into the river and creek are often above the local consent limits.
Therefore, McLellan recommends further investigation into this area are undertaken as
part of Phase 2 Due Diligence work.
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12.6 Compressed Air
DSC has a compressor station comprising 4 working sets and one standby. Compressed
air at a pressure of 6 – 7 bar is fed into the plant network. McLellan considers that this
system is adequate to support steelmaking at the design capacity. However, additional
compressed air capacity will be required to support the expansion of steelmaking.
12.7 Central Laboratory
The Central Laboratory is adequate for today’s operations. However, some upgrading is
required in order to speed up the sampling process to support the planned consistently
reduced tap to tap times in the SMS and also because of DSC’s targets of improving
product quality and further accreditation. Descriptions of such enhancements are given in
Section 14 of this Report.
12.8 Foundry
The short duration of Phase 1 visit did not allow sufficient time for McLellan to visit the
foundry. The foundry is understood to contain equipment to produce castings such as
grinding balls for the pellet plant. It is also understood that the foundry, commissioned in
1982, was expected to have a capacity of 1,200 t/y. However, McLellan considers that
the capacity is now somewhat less and certain equipment is likely to require upgrading
and refurbishment. DSC has formulated a plan for the enhancement of these facilities
and this is further explained in Section 14 of this Report.
12.9 Workshops
The DSC Works has a number of large workshops. However, due to time constraints
McLellan was not able to visit these facilities.
12.10 Mobile Plant
Inspection of the Works provided visual evidence of a mobile fleet consisting of many
vehicles. The condition of the vehicles and small plant is variable. For example, wheeled
loaders and shovels appeared in reasonable condition, whilst the slag pot carriers
appeared unserviceable.
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SECTION 13
ENVIRONMENTAL CONSIDERATIONS
13 -1
SECTION 13
ENVIRONMENTAL CONSIDERATIONS
13.1 Introduction
EAFs produce metal dusts, slag and gaseous emissions. The primary hazardous
components of dust arising from the EAF during the production of carbon steels are zinc,
lead and cadmium. However, the composition of the dust can vary considerably
depending on the furnace charge mix, the scrap composition and the additives used. For
example, the zinc content can vary from 5 to 35%. Therefore almost without exception
every SMS installation includes an acceptable fume control system.
Air emission control technologies for the collection and removal of particulate matter
include scrubbers, baghouses and electrostatic precipitators. The latter two technologies
can normally be expected to achieve 99% removal efficiency, provided they are
adequately designed and maintained.
The standard for permitted emissions from chimney stacks which applies in many other
countries is as follows:-
 Suspended particles 30 mg/Nm3 standard and dry

 Carbon monoxide 500 mg/Nm3 standard and dry
 Sulphur dioxide 0.2% vol
 Hydrogen sulphide 10 mg/Nm3 standard and dry
 Turbidity (opacity) 20%
The height of installed chimney stacks is such as to enable compliance with ground level
air quality standards. The dust collected from the EAF baghouses is re-cycled via the
Pellet Plant.
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The SMS also generates up to 80 m3/t of waste water per tonne of steel produced and this
untreated waste waters contains high levels of suspended solids. Wastewater treatment
systems typically include sedimentation to remove suspended solids, physical or chemical
treatment, such as pH adjustment to precipitate any heavy metals, and filtration. Each of
the plant areas, DRI Plant, SMS, Continuous Casting Plant and the Rolling Mill are
expected to be equipped with a water treatment centre. Each utilising equipment best
suited to meet the operational requirements and demands of the process. Where possible
all solid waste will be recycled but certain materials will need to be stockpiled.
High levels of noise are also generated during EAF operations with the highest intensity
being during the early stages of the melting operation (>85 dBA). Typically, noise at the
DRI plant area boundary is in the range of 65 to 80 dBA. The higher noise levels occur
adjacent to large fans, compressors and pumps. The process control room and
appropriately sited operator refuge rooms will be sound proofed and air conditioned.
Operators and maintenance personnel working in high noise areas will be required to wear
acoustic ear protectors.
Similar environmental problems also arise in the other main production units, but with the
possible exception of the pellet plant, the potential problems are less severe and easier to
handle.
Table 13.1 provides a summary of some of the waste materials arising and the potential
means of disposal.
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TABLE 13.1 – SUMMARY OF WASTES AND SOURCES AND DISPOSALS
Plant Material Disposal

Lime Kiln Particulates in flue gas Recycle to pelletising
Pellet Plant Low Grade material Recycle to pelletising
Direct Reduction Iron Plant Particulates ex-gas Stockpile – investigation
scrubbing recycle
Product screening Stockpile – evaluate
particulates injection to EAF
Blowdown* Off-site via monitoring
treatment
Catalyst Sale/return
Refractories Stockpile – some uses
Electric Arc Furnace Slag Stockpile – Aggregates
Scrap steel Recycle to EAF
Fume Dust Baghouse - Pellet Plant or
Landfill
Ladle Furnaces Particulates Stockpile with EAF arisings
Slag Stockpile – potential sales
Fume Dust Baghouse
Billet Casting Machines Scale Stockpile – evaluate recycle

Oil and grease Incinerate after treatment
Blowdown* Off-site via
monitoring/treatment
Rolling Mill Scale Stockpile – evaluate recycle
Oil and grease Incinerate after treatment
Blowdown* Off-site via
monitoring/treatment
*Some blowdown streams can be used for fugitive dust suppression at material stockpile
areas etc.
13.2 Environmental Impact Study
The 2.4 Mt/y Development Project will have an impact on the environment in four areas:
 Atmospheric emissions
 Solid waste
 Noise
 Effluent discharge
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In December 2006, DSC commissioned Kenfrank (NIG) Limited to undertake a study and
submit a report entitled “Gas Emissions and Air Quality Monitoring”.
At the time the report concluded the following:

 Non-compliance with total suspended solid particulate standards
 Air quality parameters were low and below the regulatory limits
 Noise levels complied with the FMENV limit
 Concentrations of volatile organic compounds were low compared to
FMENV limits
 Smoke density and ambient temperatures presented no risk
The following recommendations were made:

 Monitoring should be carried out on a more regular basis
 Any deviations should be recorded
 Ear protection must be worm in designated areas
 Nose / mouth filter pads should be worn in the SMS and Lime Plant
 Exhaust systems in the SMS and Lime Plant should be made functional
McLellan considers that due to the nature of the process, Environmental Impact
Assessments will need to be ongoing and, therefore, final development plans must also
provide environmental controls which meet regulatory requirements in all areas. The
design and specifications of the expansion project must ensure that emissions and
discharges from the finished installation are eliminated where possible. Otherwise, where
this is unavoidable, procedures must be in place to ensure compliance with local
environmental requirements.
McLellan is aware the GSHL has considerable experience in dealing with environmental
issues and providing acceptable solutions. However, during the course of the discussions
and the site visit it was apparent that significant improvements to the existing SMS fume
collection system will need to be scheduled.
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SECTION 14
PLANT EXPANSION STRATEGY

14 -1
SECTION 14
PLANT EXPANSION STRATEGY
14.1 Introduction
DSC and GSHL have devised an expansion programme. This programme spans a
timeframe of approximately two years and is targeted to increase the plant capacity to
around
2.4 Mt/y.
Figures 14.1 and 14.2 show the process flows for the existing and expanded capacity.
FIGURE 14.1- MATERIAL FLOWS FOR THE EXISTING CAPACITY
Material Flow for Existing Capacity

All values in Million MT/Year (MTPA)
except Oxygen Plant - tonnes/day
Iron ore 1.47 Lime Stone/Dolomite 0.10
Pellet Plant 1.46 Burnt Lime/Dolime 0.05 Oxygen Plant- TPD* 80

99% 49%
DRI
Mod-IV Mod-V Total
GrossDRI (2 Modules) 0.51 0.51 1.02
70%
Scrap
Domestic 0.15 SMS ( With 1 LF) Casters
Total 0.174 EAF II EAF IV EAF I Total CCM II CCM III CCM I Total
Imported 0.00 0.25 0.25 0.25 0.75
1.00 0.32 0.32 0.32 0.96
Int. Return 0.022

1.91% Rolled Products Billets for DSC Rolling Mill
0.30 0.31
2.5% 96.59%
Billets for Sale/ASCL Conversion/Export
0.65
* Existing oxygen plant capacity is 80 TPD

Note : All Percentage values are yield w.r.t. raw material for that process/plant
Figure 14.1 shows the existing design capacity feeding the onsite rolling mill and also
supplying billets to ASCL and for external sale. Figure 14.2 shows expanded primary and
steelmaking facilities and a single onsite rolling mill remaining. The Phase 2 development
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14 -2
of DSC is for around 2 Mt/y of long semis (blooms and billets will be transferred to ASCL or
sold to other customers.
FIGURE 14.2 - MATERIAL FLOWS FOR THE EXPANDED CAPACITY
Material Flow for 2.4 million MT Liquid Steel

All values in Million MT/Year (MTPA)
except Oxygen Plant - tonnes/day
Iron ore (Itakpe) 1.66 Lime Stone/Dolomite 0.36
Iron Ore( Imported) 0.57
Imported Pellets 1.43
Pellet Plant- DSC Pellets 2.22 Burnt Lime/Dolime 0.18 Oxygen Plant- TPD 500
99% 49%
DRI
Mod-IV Mod-V Total
Prime DRI (2 Modules) 1.09 1.09 2.17
59.5%
Scrap
Domestic 0.24 SMS (with 3 LF) Casters
Total 0.66 EAF II EAF IV EAF I Total CCM II CCM III CCM III Bloom Total
Imported 0.25 0.80 0.80 0.80 2.40 0.56 0.56 0.56 0.70 2.39
85% 100%
Int. Return 0.175
1.9% Rolled Products Billets for DSC Rolling Mill
0.38 0.39
2.50% 96.6%
Billets for Sale/ASCL Conversion/Export
2.00
Note : All Percentage values are yield w.r.t. raw material for that process/plant
The following Sections of the Report describe the various plant expansions, DSC’s plans
for capital investment and also the time scheduling of the development plan.
A summary of the plant expansions is shown below in Table 14.1.
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TABLE 14.1 – DSC EXPANSION PLAN

Existing Addition for 2.4 MTPA TOTAL
Capacity Capacity Capacity
Major Plants/Units Nos (MTPA) Nos (MTPA) Nos (MTPA)
Pellet Plant 1 1.46 1 0.76 2 2.22
DRI Modules 2 1.02 1.20 2 2.22
EAFs 3 0.75 0 1.65 3 2.40
Ladle Furnace 1 2 3 0
Billet Casters 3 0.96 0 0.73 3 1.69
Bloom Caster* 0 1 0.70 1 0.70
Rolling Mill 1 0.30 0 0.00 1 0.11
Oxygen Plant (TPD)** 1 80 1 500 2 580
Lime Plant 1 0.05 1 0.11 2 0.16
*One Bloom Caster to be added.

** Two Additional Plants of 50 TPD and 100 TPD will be installed during first and
second quarter of 2008, in addition to new 500 TPD O2 Plant
14.2 Plant Expansions
Most areas and departments of the DSC Works will be affected by the DSC expansion
plan which is further described below. The various expansion plans are shown only in
principle due to the constraints of time and work in Due Diligence Phase 1 and the brief
duration of McLellan’s visit to the Works.
14.2.1 Jetty and Material Handling Facilities
The material handling facilities require upgrading to handle considerably higher volumes of
both incoming and outgoing raw materials. Section 16 of this Report describes the
expected quantities of incoming materials required by both DSC and ASCL and which will
have to be handled through the port facility.
Although many of the port and handling facility arrangements are not yet determined and
depend on the logistics study outlined in Section 16, DSC has made a commitment to
upgrade the electronic control of the unloaders and certain other items of material handling
equipment.
14.2.2 Lime-making Facilities
DSC plans to operate its existing rotary kiln that has a capacity of 66,000 t/y. The balance
of the requirements, namely 72,856 t/y of burnt lime and 79,200 t/y of dolomite will be
produced from a second kiln (rotary/shaft). This second kiln will be built by DSC. The
design basis for lime and dolomite supply is shown in Table 14.2.
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TABLE 14.2 – LIME PLANT BASIS OF DESIGN
Present Kiln Additional Kiln Total

Parameter Design Design Design
Rated Capacity 66,000 t/y 66,000 t/y 198,000 t/y
Availability 90.4% 90.4% 90.4%
Working Days 330 days 330 days 330 days
Working Schedule 24 Hours 24 Hours 24 Hours
Input 0 – 60 mm 30 – 80 mm
Limestone Limestone, Dolomite
DSC has already received three technical and commercial quotations to supply the
additional lime plant.
The strategy for sourcing limestone has not yet been firmly established and will be
supplied by one or all of the following quarries.
 Jakirra
 Ukpilla
 Auchi
 Calabar
Most of the dolomite shall be supplied from Ikpeshi and its surrounds.
14.2.3 Utility and Ancillaries
The utility/ancillary plants that require further development in order to achieve the
expanded capacity are shown below: -
 Oxygen plant
 Power and distribution system
 Compressed air
 Water supply equipment
 Laboratory facilities
 Heavy duty machinery
 Foundry
Oxygen Plant
Increased oxygen supply is required to support the increasing amount of liquid steel to be
produced and also because of the increased amount of oxygen consumed per tonne of
steel required to provide chemical energy and reduce tap to tap time.
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DSC has calculated that the current 80 t/day oxygen plant will supply 17.9 MNm³ and the
new capacity will require 176.14 MNm³. Initially DSC plans to add additional 50 t/day and
100 t/day plants followed by a 500 t/day oxygen plant. The two smaller plants will be
relocated and shipped from GSHL’s plant in Dolvi, India.
McLellan considers that this capacity should provide sufficient capability for the plant’s
oxygen and other inert gas requirements. As part of the expansion scheme a number of
other equipment units will be constructed and commissioned including: -
 Argon unit
 Oxygen compressor
Power and Distribution System
The power profile according to the expansion plan is shown in Table 14.2. The increase in
demand is considerable because of the increased steel production but also because of the
commissioning of new ladle furnaces.
TABLE 14.2 – DSC EXPANSION PLAN – POWER CONSUMPTION FORECAST (MWh)
Power Consumption MWh

Plant 2007 2008 2009 2010 2011
SMS 319,881 689,648 1,238,31 1,371,52 1,427,96
7 0 5
Pellet Plant 69,078 68,006 99,278 111,688 124,098
DR Plant 67,061 154,218 215,452 242,383 269,315
Rolling Mill 17,340 24,000 32,000 36,000 38,280
Lime Plant 3,975 5,564 13,265 14,923 16,582
Oxygen Plant 20,790 90,956 90,956 90,956 90,956
Others 21,600 23,760 43,200 43,200 43,200
Total 519,725 1,056,15 1,732,46 1,910,67 2,010,39
2 8 0 6
Ave Power Demand - MVA 147 243 374 413 425
A number of enhancements to the plant and equipment are required to support the
expanded power load and are shown below: -
 Reparation and maintenance of 140 MVA transformers No 4

 Upgrading of 33 kV Bus Bar, isolator and circuit breaker for the furnace feeders
 Repair and upgrading the thyristor controllers for SVC 2 and 3
 Retro fitting 6.6 KV circuit breakers
 Upgrading the metering and monitoring system from analogue to digital control.
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McLellan has been assured by DSC that these upgrades are sufficient to meet the
enhanced plant power requirements, however further examination of the technical aspects
is required during the Phase 2 investigations. Table 14.5 shows the capex plan for the
enhancement of the power system.
TABLE 14.5 – DSC EXPANSION PLAN – POWER DEPARTMENT ENHANCEMENTS
Equipment Enhancement US$/M

Rehabilitation of 140 MVA Transformers 2.5
Upgrade 33 KV Bus Bar, isolators, circuit 4.5
breakers and feeders
Rehabilitation of SVC thyristor controls 3.5
Retrofitting of 6.6 KV circuit breakers 1.0
Upgrading of metering and monitoring 0.5
system to digital control
TOTAL 12.0
Compressed Air System
The compressed air system comprises 4 existing compressor sets (with one spare set)
and has a capability of supplying around 8,800 Nm³/h. The expanded plant will require five
extra compressors in order that the enhanced demand of 13,200 Nm³/h can be met.
Water Supply
Water is supplied to the site by five existing boreholes each with the capability to draw
around 250 m³ of water per hour. Three additional boreholes will be drilled in the same
area to meet the expanded plant requirements.
Laboratory Facilities
A number of enhancements are required in relation to testing equipment. The need to

modernise and meet the expanded production targets means that the plant requires the
following equipment: -
 Automatic spectrolux analyser

 Nitrogen/ oxygen determinator package
 XRF spectrometer
 Thermo-elemental atomic absorption spectrophotometer
 Gas chromatograph for use in DRI process control
 Pyrometric cone equivalent tester
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14 -7
 High temp DSC apparatus

 Metallurgical microscope with image analyser
 Rapid analyser
Heavy Duty Machinery (Mobile Plant)
A number of items of DSC’s heavy machinery require replacement and/or refurbishment.

The additional operational activity in raw material and slag removal will be significant and
additional mobile plant will be required. The provisional list of additional equipment
includes the following:-
 Additional elevating truck with dumper pallet

 Kamag and ITS slag carriers
 Front loaders
 Track loaders
 Charging machines
 Fork lifts
 Mobile cranes dump truck and container
Foundry
DSC has identified a list of requirements to upgrade its foundry to produce 2,400 t/y of
castings.
14.2.4 Pellet-making Facilities
The major existing and proposed design parameters are shown below.
Rates Capacity Existing Proposed

1.5 Mt/y 2.2 Mt/y
Productivity 125 kt/month 183 kt/month
Productivity 4 637 t/d 6 864 t/d
Annual Working Days 312.5 320
Plant Utilisation 85.6 % 87.67 %
The expansion of the pellet plant is part of the overall scheme to enhance the SMS
production to 2.4 Mt/y. In order to achieve this level of production DSC plans to carry out
an enhancement programme as shown in Table 14.6. The basis of the pellet plant
expansion is upgrading certain plant items and also changing the plant operating strategy.
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The upgraded pellet plant will continue to operate as a single strand unit with the second
drying and ball line held in reserve to maintain continuity of operations in the event of any
unplanned delays occurring on the duty line. This approach is also expected to facilitate
preventative maintenance and plant availability by allowing the standby units to be
maintained offline. The developed operating plan is shown below.
Operating Plan
Production 6,864 t/d
Total Annual Hours Available 8,736
Annual Planned Shutdown 504 hrs (21 days)
Planned Maintenance 144 hrs (every 2nd month for 24 hrs)
Unplanned delay provision 432 hrs/y
Net Annual Operating Hours 7,680
Productivity 286 t/h
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TABLE 14.6 – PELLET PLANT ENHANCEMENT
Enhancement of Pellet Plant Capacity from 1.44 to 2.2 Mt/y

Rated Capacity Designed capacity Planned Capacity Capital Cost
Equipment Name Equipment upgradation
TPH Mt/y TPH Mt/y TPH Mt/y (USD Mn)
Hot gas generator & Belt
Dryer 2 X 110.7 1.66 2 X 122.9 1.84 2 X 150 2.4
conveyors upgradation. 0.40
Ball mill shell liners to be
Ball Mill 2 X 107.7 1.61 2 X 118.9 1.78 2 X 137 2.2 redesigned, Air lift blower to be
replaced with higher capacity. 1.00
GOB Dedusting fan capacity to
be enhanced 0.02
Mixed material online moisture
Ground ore storage & Mixing 204 1.53 1 X 245.2 1.84 300 2.4 analyser & moisture control
system. 0.05
5 nos.Mixed material conveyor
capacity to be upgraded. 0.02
Frequency controller for disc
drives. 0.06
Double deck roller screen
Balling Disc 3 X 80.4 1.81 3 X 88.9 2 3 X 110 2.65
system. 6.50
Redesigning of disc bed
scrappers. 0.02
DCS for Pelletising. 2.00
windbox recup. & windbox
exhaust fan H T motors
capacities enhancement. 0.90
Addition of coke in green pellet. 0.50
20 MVA transformer.
Indurating Machine 223 1.67 245.2 1.83 298 2.4 1.00
1500 KVA Generator set. 1.00
Indurating M/C cooling system
upgradation. 1.50
Installation of ESP dedusting
system. 5.00
Miscellaneous 0.50
Fired pellet production 193 1.45 215 1.6 274 2.2
TOTAL 20.47
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September 2007
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McLellan considers that the operating plan is ambitious but is achievable if a strict
operational and maintenance regime is adhered to. The DSC working hour and capacity
utilisation calculation is based on the following information presented in Table 14.7.
TABLE 14.7 – CAPACITY UTILISATION
For 1.6 Mt/y For 2.2 Mt/y

Downtime hours Downtime hours
Annual Planned Annual Planned
Utilisation Utilisation
Section
Shutdown Shutdown Others Shutdown Shutdown Others
hrs hrs
Drying & 7,500 504 144 602 8,040 480 144 96
Grinding
Pre- 7,500 504 144 602 7,680 504 144 432
Wetting
& Mixing
Balling 7,500 504 144 602 7,680 504 144 432
Induration 7,500 504 144 602 7,680 504 144 432
&
Screening
McLellan considers that further discussions are required on the proposed plant working
hours and utilisation for the expansion to 2.2. Mt/y are required during Phase 2 due
diligence.
The proposed consumption of energy and raw materials are shown in Table 14.8.
TABLE 14.8 – ENHANCED PELLET PLANT CONSUMPTIONS
Annual Consumption
Capacity Capacity
Type Description Specific Unit Unit
1.5 Mt/y 2.2 Mt/y
Consumption
Raw Materials Ground Ore 1.0058 t/t 1,456.400 2,1212,760 t/y
Slaked Lime 0.0251 t/t 36,555 55,540 t/y
Services Compressed air 5.17 Nm3/t 7.5 x 106 11.37 x 106 Nm3/y
Natural Gas 43 Nm3/t /t 62,000,000 94,600,000 Nm3/ty
Service water 0.3 m3/t 434,400 660,000 m3/y
Instrument Air 1.24 Nm3/t 1.8 x 106 2.72 x 106 Nm3/y
Energy Electrical Energy 56-62 kWh/t 81 – 88.9 123 - 136 MW/y
Consumables Refractories 0.3 Kg/t 434.4 660 t/y
Lubricants 0.02 Kg/t 29 44 t/y
Maintenance & 0.1 Kg/t 145 220 t/y
Spare Parts
Grate Bars 0.02 Kg/t 29 44 t/y
Grinding Media 0.5 Kg/t 724 1100 t/y
DSC plans to modify and upgrade the following equipment.
 Drying Drum
 Ball Mill
 Re-Wetting and Mixing
 Balling Discs
 Indurating Machine
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 Electrical and Engineering Provisions
A summary of the proposed modifications is given below.
Drying Drum
TABLE 14.9 – DRYING DRUM SPECIFICATION
Rated Capacity Design Capacity Planned Capacity

2 x 111 t/h 1.66 Mt/y 2 x 123 t/h 1.84 Mt/y 2 x 250 t/h 2.4 Mt/y
Operating hours – 7,500 Operating hours – 7,500 Operating hours – 8,040
Table 14.10 provides a summary of the current and planned capacity for the drying drum.
In order to enhance the capacity on the units upgrades are required in the following areas:-
 Hot gas generator

 Belt Conveyors
 Burner Automation
 Drying Drum Shell Lifters
Ball Mills
TABLE 14.10 – BALL MILL SPECIFICATION

2 x 108 t/h 1.61 Mt/y 2 x 120 t/h 1.78 Mt/y 2 x 137 t/h 2.2 Mt/y
Table 14.10 provides a summary of the current and planned capacity for the Ball Mills In
order to enhance the capacity on the units upgrades are required in the following areas:-
 New Shell Liner Design

 Increased Capacity Air Lift Blowers
 Facility to be provided for coke storage and dosing
Re-Wetting and Mixing
TABLE 14.11 – RE-WETTING AND MIXING SPECIFICATION

204 t/h 1.53 Mt/y 245 t/h 1.84 Mt/y 309 t/h 2.37 Mt/y
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Table 14.11 provides a summary of the current and planned capacity for the re-wetting and
mixing. In order to enhance the capacity on the units upgrades are required in the
following areas:-
 Increased capacity ore bin

 New material moisture analyzer and moisture control system
 Conveyor upgrades
Balling Discs
TABLE 14.12 – BALLING DISC SPECIFICATION

3 x 80.4 t/h 1.81 Mt/y 3 x 89 t/h 2.0 Mt/y 3 x 113.3 t/h 2.61 Mt/y
Table 14.12 provides a summary of the current and planned capacity for the Balling Discs.
In order to enhance the capacity on the units upgrades are required in the following areas:-
 Frequency controllers
 Double deck roller screen
 Improved design disc bed scrapers
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September 2007
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Indurating Machine
TABLE 14.13 – BALLING DISC SPECIFICATION

223 t/h 1.67 Mt/y 245 t/h 1.83 Mt/y 286 t/h 2.2 Mt/y
Table 14.13 provides a summary of the current and planned capacity for the indurating
machine. In order to enhance the capacity on the units upgrades are required in the
following areas:-
 Burner units
 Burner unit port refractory
 Furnace hood refractory
 Windbox recuperator and exhaust fan capacities (larger fans and motors)
 Cooling water system
 Emergency Product Conveyor
 New dedusting system at the down draught and preheating zones
Electrical & Engineering Provisions
According to DSC a capex provision is also required for the following:-
 DCS for Pellet Plant (dust collection system)

 20 MVA transformer
 1500 KVA Emergency Power Generator
Pellet Plant Capital Expenditure Plan
The proposed capital expenditure plan for the pellet plant is summarised in Table 14.14
and is estimated to be US$ 20.5 M.
14.2.5 DRI Production Facilities
DSC intends to enhance its existing DRI facilities to increase each module capacity from
0.51 Mt/y to 1.085 Mt/y. This is a significant increase in production rate. However, other
similar modules are operating at such a rate of production around the world. The DSC
plan includes the following actions.
Increase the reactor internal volume by reducing the refractory wall thickness by
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September 2007
14 -14
75 mm and increasing the height by 500 mm. This will give an approximate increase in
working volume of around 23%.
Increase the number of bustle ports in association with the increased diameter will allow
better and more efficient gas distribution.
Raise the bustle gas temperature, this will result from the above enhancements and will
allow DSC to raise the temperature from 760°C to around 1,000°C.
Natural gas injection will be made into both the bustle main and transition zone to allow
increased amount of self reforming.
Oxygen injection into the reformed gas will allow higher operating temperatures and
increased productivity.
In association with these capital developments several other existing plant items require
considerable maintenance including repairs to both feed gas heaters. The plant also
requires several equipment items to support the automation which is required to enable
these enhancements to be efficiently operated.
14.2.6 Steelmaking Facilities
GSHL and DSC Senior Management have presented a 2.4 Mt/y Development Plan, which
is considered by both parties to be the most appropriate way forward.
Immediate Programme
In the short term, major efforts to improve SMS production are directed towards the
refurbishment of EAF1 and CCM1, which at present are approximately 75% complete.
The software for the EAF1 electrode regulation system is expected to be complete by third
week of August 2007 and the commissioning of individual equipment on both units is
scheduled to start during October 2007.
EAF Improvements
According to DSC, the following enhancements are to be introduced on all three EAFs in
order to achieve a 65 minute furnace tap-to-tap time: -
 Furnace Transformer Size to be increased from 60 MVA to 100 MVA

 Co-Jet Supersonic Side Lances to increase chemical energy input
 15t Hot Heel Practice
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 Eccentric Bottom Tapping Furnace Shells

 New Hydraulic electrode mast and regulation control systems
 S-7PLC Control and Level 2 Automation
Each EAF is expected to produce an average of 22 heats per day, giving a minimum total
of 800,000t of liquid steel per furnace per year and 2.4 Mt/y of liquid steel from the
combined SMS.
Although McLellan has no concerns about the need to carry out the above enhancements,
certain items appear to have been overlooked. Clarification is therefore required on the full
scope of work and the corresponding funding requirements. For example, in addition to
the above items the position or the following requirements need clarification:-
 Raw material supply logistics for increased level of production

 All furnace shells and roofs will need to be water cooled
 Adequate water systems for increased production levels
 Automated slag door lance manipulators
 Adequate oxygen, nitrogen and possibly argon levels
 Secondary fume extraction will be required
 Confirmation that the existing fume cleaning facilities can cope with the
increased burden
 Fume offtake drop out boxes will be required
 Consideration of dedicated baghouses, to support a ‘one-on-one’ (EAF to Ladle
Furnace to CCM) concept
 Casting bay logistics required for increased level of production
Ladle Furnaces
In order to improve EAF productivity and handle the increased liquid steel production two
additional ladle furnaces (Secondary Steelmaking Facilities) are to be installed. The SMS
is then expected to operate on a ‘one-on-one’ basis whereby during normal operations
each EAF will have a dedicated ladle furnace and casting machine.
According to DSC, the new ladle furnaces will each be powered by 30 MVA transformer
with a heating rate of 5oC per min. The expected duration at the ladle furnace treatment
time is 20 min and transfer time of 10min giving a total of 30 mins, which is considered
sufficient to meet the EAF tap-to-tap-time.
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The introduction of ladle secondary steelmaking is also expected to significantly improve

casting machine performance and promote sequence casting, which in turn will also
improve plant yield and reduced conversion costs.
Summary of DSC’s Production Calculation Criteria for 2.4 Mt/y
EAF capacity 110t

Hot heal 15t
Number of EAF 3
Transformer capacity 100 MVA
Number of heats/EAF/day 24
Working days 304
Annual Maintenance 8 days
Maintenance days 48 days (96 h/month)
TPM Activities 5 days (20 min/day)
Production/furnace/day 2632t
Tap-to-tap time 55 min
Power on-to-tap time 41 min
Oxygen consumption 45 Nm3/t
Natural gas consumption 5.6 Nm3/t
Nitrogen consumption 1.5 Nm3/t
Compressed air consumption 1.5 Nm3/t
Coke consumption 25 kg/t
Power consumption 500 kWh/t
Lime consumption – EAF 40 kg/t
Lime consumption – LF 15 kg/t
Dolomite consumption 30 kg/t
Annual liquid steel production/EAF 800,128t
Annual liquid steel production 2,400,384t
Continuous Casting Facilities – 2.4 Mt/y
Bloom Casting Machine
In order to handle increased liquid steel production and satisfy the requirements of ASCL
together with additional markets, a new additional six-strand bloom caster with a range of
130 mm x 130 mm to 250 mm x 250 mm sections is proposed.
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September 2007
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CCM 1
CCM 1 is to be fully refurbished and modernised and be capable of casting at 3.7 – 4.5
m/min.
The modernisation is expected to involve the following:-
 Secondary water cooling shall be reinforced with online booster pumps

 Upgraded Withdrawal and Straightening Units
 New AC Drives, with S-7 PLC Control Systems
 Automatic mould level control
 Hydraulic Mould Oscillation
 Turret lifting arms and load cells
 Giga Billet Cutting Torches.
Revised CCM Specification – 2.4 Mt/y
Caster capacity 615,384.8 t/y

No of casters 3+1
No of strands 6 per caster
Size (Billets) 100 x100, 120 x 120,
Size (Blooms) 130 x 130, 250 x 250
Heat size 110t
Heat sequence 10
Turn around time 120 min
Casting speed 3.7 – 4.5 m/min
Average casting speed 4 m/min
Secondary cooling Intensified with online booster
Mould oscillator Hydraulic
Automation Level – 2
Mould level control AMLC
Re-strand facility Yes
Billet cutting Shear/Giga
Annual production 2,340,374t
Slag Management
Slag generation from the EAF’s is expected at the rate of 140 kg/t, which results in a daily
slag generation of 1,023t from the three furnaces, amounting to 336,677 t/y. In order to
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September 2007
14 -18
handle the EAF slag, two slag pot carriers, twenty slag pots and four Cat 973 excavators
are envisaged.
According to DSC, EAF 1 and 2 will use slag pots at their respective slag bays, whilst EAF
4 will slag directly to the floor for removal by Cat 973 excavator. Fourteen slag pots are
planned for EAF 1 and 2 and a further six slag pots are to be provided for ladle slag.
McLellan considers that further discussion is required to clarify the different methods to be
applied at the EAF’s and the impact of slag free tapping (via EBT Furnace) on casting bay
operations.
Summary of Auxiliary Support Services – 2.4 Mt/y
Scrap Basket Carriers 4 (in addition, total 8)

Slag pot carrier 2
Slag pots 20 No. of 16 m3 volume
GHH dumper 2
Additional scrap yard 1
Weighbridge facility 1
Magnet/grab crane capacity 3 x 15t
Cat 973 tapping pit cleaner 4
230 tons Charging Crane 1
Vertical Ladle Preheater / Drier 3
Horizontal Ladle Preheater 3
18 ladles in circulation 6 (additional ladles required)
Scrap Management
According to DSC, the existing scrap yard is not of sufficient size to handle 413 790t of
purchased scrap and 137 934t internal scrap arisings. In order to satisfy the SMS
increased scrap handling and charging requirements an additional scrap yard with 3 × 15t
capacity grab/magnet Crane is proposed together with four additional 130t Scrap basket
transfer vehicles.
At present two scrap basket transfer vehicles are in operation and two are being
refurbished.
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September 2007
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DSC considers that eight scrap basket transfer cars will be sufficient to cater for the needs
of the SMS. Due to internal space restrictions the new scrap yard will be located outside
the SMS.
McLellan considers that a more detailed study of the scrap receiving, inspection,
processing, storage, and handling proposals may be advisable.
Lime Supply
In conjunction with the installation of water cooled shells on the EAF’s, the lime feeding will
also be modified from existing pneumatic lime supply to new belt conveyor lime feeding
system with weighing facility. A dual system is proposed whereby a reversible belt at upper
storage bin will allow the system to feed the two furnaces as required.
Ferro Alloy Supply
The existing ferro alloy feeding system is insufficient to meet up the expansion plan of
2.4 Mt/y and is to be upgraded with modern more effective weighing system.
Additional Electric Overhead Travel (EOT) Cranes
 EAF Charging Bay

Existing shell and scrap basket handling logistics in the EAF charging bay will
be improved by the installation of an additional new 230 t crane.
 Trimming Bay
The trimming bay will also be strengthened with one more new crane of the
same capacity.
 Casting Bay
DSC considers that the existing caster bay cranes are sufficient to handle the
logistics of 2.4 Mt/y and that the billet yard cranes will also be sufficient after
incorporating the S-7 automation in billet discharge area.
Figure 14.3 shows the expansion plan material flow for the steelmaking and continuous
casting departments.
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September 2007
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FIGURE 14.3 - 2.4 MT/Y DEVELOPMENT PLAN – FLOW DIAGRAM

PURCHASE
SCRAP-
413,790T Sub Process
CHARGE MIX- 2: Detailed Procedures
DSCDRI-
2,758,621T 1,000,000 T
INTERNAL
SCRAP-137,934 T IMPORTED
OXYGEN- DRI-1,206,896T
2,461,584Nm3 DOLOLIME-
SCRAP- 75,740T
DRI-2,206,897T
551,724T
NATURAL-GAS LIME-
13,784,618Nm3 138856T
YIELD-87%
NITROGEN-
11,187Nm3 FURNACE1- FURNACE2- FURNACE4- 2.4 mt of Liquid Steel
800,000T 800,000T 800,000T & 336,675.6t of slag
8038
COMPRESSED
AIR-11,187Nm3
LADLE LADLE LADLE TO SCRAP
FURNACE1- FURNACE2- FURNACE3- YARD
800,000T 800,000T 800,000T
BLOOM
CASTER1- CASTER2- CASTER3- CASTER-
560,000T 560,000T 560,000T 720,000T
SCRAP/CROP END-
Billet yield-
1.5%
97.5%
Billet Billet YIELD-97%

Billet
546,000T 546,000T
546,000T
OPEN MRKT- ASCL-RM- 2.34 m t of Billet &

DSC-RM- ASCL-RM-
240,000T 700,000T Bloom
400,000T 1,000,000T
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14.2.7 Rolling Mill Facilities
The current rolling mill capacity is about 0.32 Mt/y, depending on product mix and the
enhanced rolling mill capacity will be some 0.38 Mt/y which is an increase of just under
20%.
Most of the rolling mill enhancements are aimed at improving automation and increasing
the rolling speed capability. Many of the mill equipment items will be automated including
the reheat furnace, mill (e.g. scheduling, mill drives, looper control, mill master system,
cooling bed shear and cooling bed) and finishing equipment. The automation should allow
the mill to roll at the design speed of 15 m/s, whereas in the past the analogue system did
not allow the mill to roll at such speeds.
14.3 Enhancement Schedules
DSC has scheduled the expansion plan to be completed over a period of some sixteen
months. At the time of investigating project schedules, little constructive debate could take
place during the visit because the expansion plan time schedule was not presented in
sufficient detail. Hence, DSC e-mailed its latest schedule to McLellan on 4th September.
Figure 14.4 shows the DSC production plan over the next few years and Tables 14.14 and
14.15 present the overall expansion time schedules.
FIGURE 14.4 – DSC PRODUCTION SCHEDULE
2.5
2.0
1.5
Mt/y
1.0
0.5
0.0
2007 2008 2009 2010 2011
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Figure 14.4 shows the production plans for the current and next four years. The majority
of the expansion work will occur from late 2007 to early 2009 and 2010 is shown as a ramp
up year. Table 14.14 shows the expansion plan for the main operating departments.
TABLE 14.14 – DSC EXPANSION PLAN SCHEDULE – MAIN OPERATING

DEPARTMENTS
PROJECT IMPLEMENTATION TO 2.4MT LIQUID STEEL

MONTHS
Sr No Job description 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
1 PELLET PLANT
Order placement, opening of LC, etc
Engineering
Manufacturing & Delivery at Site
Civil & Structural
Erection
Commisioning
2 LIME PLANT
Engineering
Civil & Structural
Erection
Commisioning
3 DR PLANT
Engineering
Civil & Structural
Erection
Commisioning
4 SMS
Engineering
Civil & Structural
Erection
Commisioning
5 ROLLING MILL
Engineering
Civil & Structural
Erection
Commisioning
Table 14.15 shows the expansion plan for the support, utility and ancillary departments.
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TABLE 14.15 – DSC EXPANSION PLAN SCHEDULE – UTILITY AND ANCILLARY

DEPARTMENTS
DELTA STEEL COMPANY PLC

PROJECT IMPLEMENTATION TO 2.4MT LIQUID STEEL
MONTHS
Sr No Job description 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
6 OXYGEN PLANT
Engineering
Civil & Structural
Erection
Commisioning
7 POWER SUPPLY
Engineering
Civil & Structural
Erection
Commisioning (Ist phase)
Commisioning (2nd phase)
8 WATER SUPPLY
Engineering
Civil & Structural
Erection
Commisioning
9 RAW MATERIALS &JETTY
Engineering
Civil & Structural
Erection
Commisioning
10 FOUNDRY
Engineering
Civil & Structural
Erection
Commisioning
McLellan has not yet had the opportunity to discuss the detail of the expansion plan
schedule with DSC and can only make observations and comments based on its industry
experience. McLellan considers that the schedule of only sixteen months appears
extremely challenging especially when taking into consideration the volume of activity that
must take place in the SMS, whilst maintaining some level of production.
Therefore, McLellan could not authoritatively state that overruns would not occur until
further discussions regarding the time schedule could take place.
14.4 Capex Budgets
The procedure for McLellan’s Due Diligence investigations were undertaken at a late stage
of the Due Diligence visit after each of the individual expansion plans were recognised and
understood.
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During the two and a half day Phase 1 Due Diligence visit McLellan had learned that the
capex budget was originally US$ 250M and that it had been amended to US$ 280M in
recent weeks and in the final stages of the Phase 1 Due Diligence McLellan began
discussions with DSC central planning department relating to the overall expansion budget
and time schedule.
The time schedule shown to McLellan during this meeting was not in sufficient detail to
present a meaningful explanation of the expansion plan in terms of timing. Consequently,
this prompted the capex schedule meeting to be suspended until DSC developed a more
meaningful schedule. This in turn affected the time available to discuss the capex budget.
However, some limited discussions were made in relation to the capex budget and the
revised budget was sent to McLellan by e-mail on 4th September.
The latest capex budget was supplied to McLellan by DSC central planning staff after
interchange of emails and is shown in Table 14.16. The total capex budget is some
$282M. A proportion of the budget is made up from firm quotations for the supply of
equipment and others are estimates based on GSHL experience. Some items such as the
logistics sections are subject to separates studies and have not yet been completed.
Therefore any such capex estimates must be classed as preliminary.
TABLE 14.16 - DSC CAPEX BUDGET
Capex Capex
Description (US$ M) Description (US$ M)
Site Development –
A additional storage 12.00 D Rolling Mill 2.00
Modernisation 3.00
B Iron Making - Automation
Pellet Plant 20.00 Sub Total Rolling Mill 5.00
Automation-Pellet Plant 3.50 -
Sub Total Pellet Plant 23.50 E NIOMCO Revamping 21.00
DR Plant (Mod-IV) 13.24 -
DR Plant (Mod-V) 13.00 F Auxiliary Facilities -
Automation-DRI Plant 4.00 Oxygen Plant ( 500 TPD) 18.60
Sub Total DRI Plant 30.24 Lime Plant ( 120,000 TPA ) 7.80
Iron Making Total 53.74 Lime Plant Automation 3.00
Heavy Duty Equipment (Kamag,
ITS, Bulldozer, etc.) 15.00
C Steel Making - Cranes 4.00
EAF II - Auxiliary Facilities Total 48.40
CO-JET Lances 3.00
Modification ( EBT + HYD
Regulation) 1.60 G Logistics
Ultra High Power (UHP)
Transformer 3.00 Revamping of Jetty 5.00
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Capex Capex
Description (US$ M) Description (US$ M)
Fume Extraction System 2.00 Automation 2.00
Other Material handling
Automation-EAF-II 0.10 Expansion Projects 10.00
Sub Total EAF-II 9.70 Floating Dock 25.00
Caster II - Logistics Total 42.00
-
Power Distribution and
Modification 1.00 H Electrics 12.50
Automation 0.13 Automation 3.00
Power Distribution and
Sub Total Caster-II 1.13 Electrics Total 15.50
Ladle Furnace - I Water Supply Facility 3.50
-
Modification incl.
Automation 0.13 J Lab equipment 2.50
EAF IV -
CO-JET Lances 3.00 K Foundry-Modernisation 1.00
Modification 0.50 Automation 1.00
Transformer 3.00 Foundry-Total 2.00
Fume Extraction System 2.00
Engineering and Project
Automation 0.13 L Management 7.00
Sub Total EAF-IV 8.63
Other Misc. incl. Townships,
Caster III - M Maintenance , etc. 5.00
Modification 1.00
Automation 0.10 N Information Technology 3.00
Sub Total Caster-III 1.10
EAF I -
Rehabilitation 1.32
CO-JET Lances 3.00
Transformer 3.00
Fume Extraction System 2.00
Automation 0.13
Sub Total EAF-I 9.45
Caster I -
Rehabilitation 1.07
Modification 1.00
Automation 0.13
Sub Total Caster-I 2.20
Bloom Caster 15.00
New Ladle Furnace (2) 14.00
Steel Making Total 61.34 Total Capital Expenditure 281.98
Subsequent discussions on capex between McLellan and GSHL/ DSC took place during
the visit regarding specific main plant areas. These discussions mainly centred on the
development of the SMS because of its importance in the overall current rehabilitation and
expansion schemes. One such technical debate, for example, covered the future
capability of the existing dust and fume extraction system to keep pace with the enhanced
Rep5097/260090
September 2007
14-26
rate of steelmaking operations. This omission from the plan raised some concerns within
the McLellan team that some other important items necessary for the success of the
expansion might also not be included in the current capex budget.
Since this discussion, a budget of US$2M has been allocated to the dust extraction
system. This small example illustrates why technical scrutiny of the plan is important and
raises some concern regarding complete inclusion of all required items.
Another area of concern is the changing nature of the capex budget. For example,
categories such as “DSC automation” budget of US$35M has disappeared from an earlier
plan and “NIOMCO Revamping” has appeared in the most recent budget. However, the
total capex remains at around US$280M.
This changing nature of the capex budget causes doubts about its robustness and
McLellan recommends as a priority that further investigation and discussion should be
undertaken during Phase 2 Due Diligence investigations.
Similarly, no budget item for contingency is included at present. Therefore, although this is
a relatively early stage of the project, McLellan cannot confirm with confidence that the
present budget is final. If so it is feared that it will be susceptible to overspend
14.5 Expansion Plan Summary
In most areas McLellan considers that the rehabilitation and expansion plans are well
conceived. The site is large enough to accommodate the expansions without real
compromise of space. The plant infrastructures, such as workshops, are large enough to
support expansion. Many of the utilities, such as water, compressed air, natural gas and
power, appear on first inspection to be capable of supporting expansion without major
capital investment.
The port facility, albeit large enough to support 1 Mt/y or more, requires careful
consideration because GSHL intends to use DSC as a material handling hub for ASCL.
GSHL informed McLellan that a logistics study is now ongoing to measure the physical
needs of the expansion project. McLellan recommends that the findings of this study are
closely scrutinised.
Rep5097/260090
September 2007
14-27
The expansion appears technically feasible and uses modern technology which is
established and proven. However, McLellan considers that many of the production targets
are near to world best levels and, therefore, considers that this may be ambitious in
Nigeria because of country risks and the relatively inexperienced nature of the workforce.
The time schedule still requires further analysis and scrutiny, as explained above in
Section 14.3 of this Report. McLellan still awaits an updated schedule.
The budget capex comprises quotations and estimates. In many areas there is
concurrence between McLellan and DSC and in other areas more discussion is required.
McLellan considers that DSC requires revaluating certain aspects of the expansion capex
budget including project management, contingencies and certain technical items such as
the SMS dust extraction system.
Rep5097/260090
September 2007
SECTION 15
HUMAN RESOURCES AND MANAGEMENT

15-1
SECTION 15
HUMAN RESOURCES AND MANAGEMENT
5.1 Introduction
DSC is located in the Aladja-Owvian villages, near Warri in the Delta State in the oil
producing Niger Delta region of Nigeria. The Company’s location falls under the Udu
Kingdom. The Company is a major employer in the area, along with Chevron-Shell which
is located at Port Harcourt some 200km from Warri. Local, English speaking, educated
labour appears to be readily available.
The Company is unionised and has two separate trade unions, one for the Staff and one
for the Workers. The two unions involved are affiliated to the National Labour Congress.
DSC has good industrial relations within the plant and is working closely with the labour
unions to promote plant productivity. Since the takeover, the company has experienced
only relatively minor disruptions, mainly due to disputes of a national nature. Even so, as
an indication of the good working atmosphere within the plant, during a recent national
strike related to petrol prices DSC continued to operate normally.
However, whist the Plant was under the ownership of the Federal Government, 3000
employees were laid off and a dispute arose relating to their pension rights, which led to a
two day strike. DSC has indicated that following an interim payment and the promise of a
final compensation payment next year and state that the problem has been resolved.
The company also has it own township in close proximity to the Works.
15.2 Current and Future Manpower Levels
McLellan considers that the existing and proposed manpower levels are relatively high by
European and World standards. However, the cost of local labour is relatively low and the
priority is to increase production by introducing new technology and more reliable
equipment. The corresponding increase in plant throughput is expected to lead to more
competitive productivity (ie an increase in the tonnes produced per man ratio).
Rep5097/260090
September 2007
15-2
Table 15.1 is a summary of the current workforce at DSC.
TABLE 15.1 – SUMMARY OF NUMBER OF EMPLOYEES AT DSC
Av e ra g e Sa la ry
Ca t e g o ry No . o f Em p lo y e e s
(Na ira )
Nig e ria n
Hig h e r Ma n a g e m e n t 5 216,300
Se n io r Ma n a g e m e n t 22 152,000
Mid d le Ma n a g e m e n t 188 100,100
Su p e r viso r s St a f f (Te c h /No n Te c h ) 1098 52,000
Wo r ke r s (Op e r a t ive s) 588 26,000
Su b t o t a l 1901
In d ia e x p a t - Sp e c ia lis t s
Su b t o t a l 227
Tra in e e s
GETs 105
Dip lo m a 22
Tr a d e (Cr a f t ) 49
GETs (f r o m In d ia ) 15
Su b t o t a l 191
Co n t ra c t o rs
Su b t o t a l 671
TOTAL 2990
According to DSC, following the expansion to 2.4 Mt/y the number of employees is
expected to increase from 2,990 to 3,800.
A more detailed assessment of the contracted workforce needs to undertaken during the
next stage of the Due Diligence work.
15.3 Recruitment and Training
The planning of recruitment and training of manpower is designed to consider:-
 the available skills

 local shortages of the required skills and experience
 correct timing such that new personnel are allowed adequate training time
 matching qualifications and experience to specific requirements
 a workforce balanced in age, specialist disciplines and experience.
Table 15.2 shows DSC recruitment plan to cover forthcoming retirements.
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September 2007
15-3
TABLE 15.2 – DSC RECRUITMENT PLAN AGAINST RETIREMENT
Re t ire m e n t s No s .
2007 12
2008 24
2009 25
2010 54
2011 35
150
2012 - 2016 325
15.4 Development of Skills
The Company has its own Training Centre consisting of a workshop and classrooms. A
recent assessment of the skill levels of the existing workforce indicates a level of 4.5 on a
scale of 1 to 10. In conjunction with the planned capital expenditure programme, DSC
therefore recognises the need to improve the skills of its workforce on an ongoing basis.
15.5 Security
DSC states that it has not experienced any problems with local community. However, as a
precautionary measure the Company has its own civilian security force, an assigned
platoon of soldiers and a police station on the premises. In addition, the local area is
protected by a unit of the Nigerian army.
Rep5097/260090
September 2007
SECTION 16
LOGISTICS – RAW MATERIALS AND FINISHED PRODUCTS

16-1
SECTION 16
LOGISTICS – RAW MATERIALS AND FINISHED PRODUCTS
16.1 Introduction
Movement in and out of the plant is a key challenge for DSC and GSHL. This is for two
main reasons. First, the jetty only allows vessels of relatively small deadweight to berth
and, secondly, DSC is required to act as a hub for the handling of ASCL raw materials.
The original design concept was to import iron ore directly into DSC from countries such as
Brazil. However, development of the Itakpe mine has allowed some pressure to be taken
off the jetty because deliveries of NIOMCO ore can be made to DSC by rail.
This Section of the Report considers movements of raw materials by road, rail and river.
16.2 Post Expansion Logistics
The river borne movements will have to support the incoming imported iron ore and
possibly the limestone requirements of DSC. In addition, DSC will need to import a
proportion of its scrap feedstock, which will also be handled by river vessels.
ASCL also plans to import its coking coal requirements through the DSC facility and then
rail the coal from DSC to ASCL.
A proportion of finished goods from both DSC and ASCL will also be transported through
the DSC jetty facility.
Therefore, the overall logistical movements will comprise raw materials for DSC and ASCL
into the jetty facility and finished goods out of the jetty. Rail movements will comprise iron
ore transportation travelling south from NIOMCO to DSC and coal moving northwards from
DSC to ASCL. The logistic requirements for the year 2001 are in Table 16.1.
Rep5097/260090
September 2007
16-2
TABLE 16.1 – LOGISTIC MOVEMENTS – YEAR 2011
LOGISTICS MOVEMENTS Mt/y

Goods into the DSC Jetty by Ship
Imported scrap 0.11
Imported lump/pellets 1.32
Imported iron ore fines 0.6
Limestone from Calabar 0.18
Coal (ASCL) 1.18
BF pellets (ASCL) 0.6
Goods out of the DSC Jetty by Ship
Rebar 0.15
Billets/ Blooms 0.39
ASCL Sections 0.194
Iron Ore from NIOCO to DSC by Rail
Iron Ore 1.63
Coal from DSC to ASCL by Rail
Iron Ore 1.18
Semis from DSC to ASCL
Blooms 0.7
Billets 0.9 est’
The Table shows that there is considerable movement of raw materials and finished
goods. GSHL stated that a team is currently conducting a study into the inter-site logistics
and conclusions and recommendations will be made in the coming weeks.
McLellan considers that this a very important part of the expansion plan and the issue of
logistics for materials in and out of ASCL and DSC requires detailed and careful
consideration.
16.3 Rail Transportation
Iron ore is transported to DSC by a combination of rail and road. Currently a rail link
transports iron ore from NIOMCO to a site that is located approximately 20 km from DSC.
From this point iron ore is transferred to the DSC site by road.
Clearly, this system is inefficient but DSC states that there are plans to complete the rail
track in the near term to link it directly into DSC’s site where wagons will then be
discharged. DSC added that the financial responsibility for the completion of this track
rests with FGN (Federal Government of Nigeria) and the line will be completed by the end
of 2007.
McLellan considers this rail link to be crucial to the expansion plan because of the need to
handle the considerably higher tonnages of raw materials.
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September 2007
16-3
Discussions between McLellan and DSC brought to light the following factors: -
 Wagons will be of a side opening type and the filling and discharging of wagons will be
optimised in order that the transportation of empty wagon sets is minimised
 NIOMCO owns and operates the two locos and a further three locos will be required to
support the expansion phase
 DSC state that NIOMC owns the wagons and is responsible for the supply of new
wagons
 The rail line is only single track with a number of passing points
 The train sets include 32 wagons and can carry 2,000t per train.
McLellan understands that the subject of rail transportation comes under the planned
logistics study, as described in the previous section.
Currently, ore is being transported by road from NIOMCO to DSC. This is because of
severe rains washing away part of the rail track. McLellan understands that this situation
has been ongoing for around two weeks and repairs are approaching completion. This
type of situation highlights problems that could severely affect logistics and production
operations at a much higher rate of productivity, and the consequent need for minimum
stocks at each location to be monitored carefully.
16.4 River and Sea Transportation
Table 16.1 shows extent of the considerable volumes to be moved by both river and sea.
Small vessels will be suitable to bring in limestone from Calabar and scrap from other
close by African regions. However, the shipment of iron ore and coal will require careful
consideration.
One of the options open to DSC is a lightering operation where larger ships are anchored
in deeper waters and discharged into smaller vessels. DSC claims that a team is to look at
this option during the last week in September. GSHL , of course, has considerable
experience of lightering and barge transport at its Indian works.
In summary, the plant logistics for both DSC and ASCL are complex and require
considerable scrutiny. A logistics and lightering study is apparently underway and should
be complete in the coming weeks. McLellan recommends that Credit Suisse reviews
these studies and examines the potential logistics problems very carefully.
Rep5097/260090
September 2007
16-4
Rep5097/260090
September 2007
SECTION 17
RISK AND SWOT ANALYSIS

17-1
SECTION 17
RISK AND SWOT ANALYSIS
17.1 Introduction
This Section of the Report presents a review of the strengths and weaknesses of the project
and examines aspects of project risk. Only the main issues identified by McLellan
associated with the project and its expansion are included. Others may come to light during
the Phase 2 Due Diligence work.
17.2 SWOT Analysis
The SWOT Analysis identifies the main strengths, weaknesses, opportunities and threats
associated with the project.
17.2.1 Strengths
The main strengths identified by McLellan are presented as follows:-

 DSC is the dominant producer in the local market from technical and commercial
perspective
 Excellent long product prices exist in the present domestic market – protected by tariffs
 GSHL’s international network – people, iron and steel technologies and raw material
resources
 Low cost natural gas
 Low cost labour
 Low cost iron ore
Dominant Market Position
GSHL already has a dominant position in the local long product market. It is the only
integrated steel producer in Nigeria, has the largest market share and is the renowned
quality supplier. The company can build from this already strong platform.
Rep5097/260090
September 2007
17-2
Strong Domestic Prices
Rebar prices are protected by a 50% import tariff, giving all domestic producers a strong
advantage over importers. This is particularly advantageous to DSC because it produces its
own billets. Therefore DSC’s cost base is comparatively robust to change as opposed to
importers of billets that having to cater with the volatility of the international billet market.
Global Steel’s Global Network
GSHL has already shown this strength in several ways. Vessel loads of Brazilian ore have
been diverted to Nigeria from other GSHL’s global operations. Such small quantities of
Brazilian iron ore, as consumed by DSC so far, would have been difficult or impossible to
procure by smaller companies. GSHL has already supplied skilled expatriates to make
DSC’s turnaround possible and its global presence has helped with negotiations and wider
acquisitions such as NIOMCO, ASCL and power plants.
Low Cost Natural Gas
The cost of natural gas is extremely low and on a par with Middle East and Russian prices.
Low Cost Labour
The cost of labour in Nigeria is extremely low.
Low Cost Iron Ore
The cost of iron ore delivered from NIOMCO to DSC is around US$38 per tonne. This is
around one third of international prices. However, the quality is poor and this is covered in
the Weaknesses Section below.
17.2.2 Weaknesses
The main project weaknesses as identified by McLellan are as follows:-
 Silica content in the NIOMCO iron ore is unacceptably high for DRI production
 Lack of inertia following the long plant shutdown – Manpower and plant and equipment
 Shallow water restricts capacities of incoming vessels at the jetty.
High Silica Local Ore
Rep5097/260090
September 2007
17-3
The high silica content of the iron ore is a serious problem to DSC. Although the cost of ore
is low by international standards, its value in use is questionable.
For example, DSC currently imports pellets and lump ore from Brazil to dilute the affect of
the high silica ore in the SMS. Even with this dilution the affect of high silica loading in the
electric steelmaking process causes excessive tap to tap times and power consumptions
and also loss of liquid steel yield.
The July financial reports state that the cost of billet production was some US$ 418/t, which
was US$134/t above target. In terms of the cost of billet production, this is relatively high but
is still considerably cheaper than imported billet. However, it shows the potential that could
be gained with greater manufacturing efficiency.
Inertia
McLellan noticed a lack of inertia of plant and equipment and also of manpower. This is not
a phenomenon applicable to DSC or Nigeria; McLellan has witnessed it in many plants that
have been stopped over a long period and then restarted. Bringing plants back from
extended delays often results in breakdowns of components that may have seized or broken
down prematurely from the years of inactivity. Similarly, bringing the operations and
maintenance teams back up to full speed takes time. Some employees may have left the
company and others may have lost skills. Management needs to remain focussed.
Breakdown of equipment items is disruptive to steady state operation and skills are lost by
people who have left the region.
17.2.3 Opportunities
The main opportunities as identified by McLellan are as follows:-
 Opportunity for continued market growth and expansion

 First phase of plant reparation is complete but there is a need to quickly move forward
Future Growth and Market Opportunity
GSHL is the dominant and reputedly highest quality producer in the local long products
market and is in a good position to drive further market and product growth. GSHL has
based its projections on 6% GDP growth. However, the growth of construction and
construction products in Nigeria could be somewhat higher.
Rep5097/260090
September 2007
17-4
Need to Realise Future Plant Potential
The first phases of plant reparation are now coming to completion and GHSL has to be
applauded for the work so far. However, the sales and steelmaking statistics have shown
recent stagnation and DSC needs to continue its progress back towards design capacity and
its planned targets.
17.2.4 Threats
The main threats identified by McLellan are as follows:-
 Country risk – e.g. political instability, security threats

 Potential infrastructure/ logistic issues
 Potential future removal of import tariffs
Country Risk
Nigeria carries a significant country risk. Corruption and security are two significant
concerns. DSC has already lost several days operations over industrial disputes over
pensions and also through elections. Escalations of such types of problems would be
extremely disadvantageous to DSC and GSHL.
Potential Infrastructure/ Logistic Issues
The expansion plan involves the movement of significant quantities of raw materials,
blooms, billets and finished products. DSC and GSHL are presently conducting studies in
these areas and the feasibility of moving such high quantities of goods is not yet established.
McLellan recommends that these logistics and infrastructural issue should be confirmed
before the rest of the project can be considered feasible.
Tariff Removal
The removal of import tariffs in the future will adversely affect rebar prices. This will
consequentially reduce DSC’s margins. However, this should not happen for several years
and by that time DSC’s cost base should have further improved. Any reduction in tariffs is
also likely to be phased over a number of years.
Rep5097/260090
September 2007

Mclellans Phase I Report

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Delta Steel Modernisation

Due Diligence Study – Phase 1 Visit Report

2. BACKGROUND – DELTA STEEL 2-1

2.1 Introduction 2-1

3. PROCESS FLOWS AND RECENT OPERATING STATISTICS 3-1

3.1 Introduction 3-1

4. PRODUCTS AND MARKETS 4-1

4.1 Introduction 4-1

5. RAW MATERIALS - HANDLING AND PROCUREMENT 5-1

5.1 Introduction 5-1

6. UTILITIES AND ENERGY PROCUREMENT 6-1

6.1 Introduction 6-1

7. PELLETISING PLANT 7-1

7.1 Process Description 7-1

8. LIME PLANT 8-1

8.1 Introduction 8-1

9.1 Introduction 9-1

10. STEELMAKING PLANT (SMS) 10-1

10.1 Introduction 10-1

11. ROLLING MILL 11-1

11.1 Introduction 11-1

12. UTILITIES AND ANCILLARIES 12-1

12.1 Introduction 12-1

13. ENVIRONMENTAL CONSIDERATIONS 13-1

13.1 Introduction 13-1

14. PLANT EXPANSION STRATEGY 14-1

14.1 Introduction 14-1

15. HUMAN RESOURCES AND MANAGEMENT 15-1

15.1 Introduction 15-1

16. LOGISTICS - RAW MATERIALS AND FINISHED PRODUCTS 16-1

16.1 Introduction 16-1

17. RISK AND SWOT ANALYSIS 17-1

17.1 Introduction 17-1

CS Phase 1 Scope of Work

Due Diligence Visit Report and Project Overview

In order to be in a position to answer CS Scope of Work questions McLellan has had to

This Due Diligence Visit Report is an independent study by McLellan, an internationally

Current Operating Position

Future Plant Developments

The format of this Report is as follows:-

Section 2 Background – Delta Steel

Section 3 Process Flows and Recent Operating Statistics

Section 4 Products and Markets

Section 5 Raw Materials – Handling and Procurement

Section 6 Utility and Energy Procurement

Section 8 Lime Plants

Section 9 DRI Plant

Section 10 Steelmaking Plants

Section 11 Rolling Mill

Section 12 Utilities and Ancillaries

Section 14 Plant Expansion Strategy

Section 15 Human Resources and Management

Section 16 Logistics – Raw Materials and Finished Products

Section 17 Risk and SWOT Analysis.

BACKGROUND – DELTA STEEL

BACKGROUND – DELTA STEEL

Delta Steel is a mini-mill based on electric steelmaking. The Works is ‘integrated’ – it

2.2 Location and Infrastructure

FIGURE 2.1 – MAP OF GSHL SITES

2.3 Plant and Facilities

DSC’s iron and steelmaking facilities include: -

Ship Unloading Facility and Stockyard