Sitting among the likes of heavyweights Rio Tinto and Vale and steelmakers Jindal, Tata, Posco and Nippon, Baobab is in good company.

But the story isn't just about having rich and influential neighbours, with work completed by this AIM-listed junior outlining the potential for a 25-year mine life.

A scoping study released in November 2011 showed Baobab's flagship Tete iron ore-vanadium-titanium project had a pre-tax net present value of $US1.4 billion.

This is based on a vertically integrated operation beneficiating titano-magnetite concentrate to be smelted to produce 1 million tonnes per annum of pig iron.

The NPV used a 10% per annum cash discount rate and showed an internal rate of return on 34%.

After capital expenditure (about $690 million) the scoping study suggested average annual net cash flow of $275 million for a minimum of 25 years.

"The scoping study results show very clearly the ‘value add' from the plans for on-site smelting of pig iron and underlines the strategic advantages of the project's unique geography," managing director Ben James said.

"Producing a higher value, high demand product will not only broaden the market base, but also mitigate the requirement to compete for rail and port access.

"The vanadium potential remains to be modelled and could add further to the value of this project.

"Reduced input costs through long-term domestic coal contracts and on-site power co-generation also need to be assessed, while the expanding resource base at Tenge/Ruoni, underpinning a meaningful plus-30 year mine life, allows scope for ramping up production."

This base case will be strengthened with resources set to increase and be upgraded this year, as James explained.

"Building on the successful exploration programmes of 2009 and 2010, Baobab accelerated activities in 2011 to achieve key milestones," James said.

"We defined a minimum resource base of 300 million tonnes on which a scoping study could be finalised; and we completed an aggressive 40,000m drilling campaign that resulted in the expansion of the global resource base to an interim 324 million tonnes, based on the Ruoni North and Ruoni South areas."

"An additional resource statement for the Tenge deposit, due for release during March, is set to enlarge the inventory again, pushing it towards 500 million tonnes."

The first round of assays from Tenge returned significant intercepts including 115m at a head grade of 36% iron.

Using Davis Tube Recovery, this drill hole returned 63% iron, 0.9% vanadium oxide and 6.6% titanium dioxide.

Other results from this round of drilling included 109m at 33% iron, with DTR values of 58% iron, 0.7% vanadium oxide and 12.4% titanium oxide.

Further drilling to increase resources and upgrade their status will run concurrently with progression of the prefeasibility study.

"The focus of the prefeasibility study, which will run until the first quarter of 2013, is going to be proving that the beneficiation of the project works, as well as identifying the correct smelting techniques," James said.

Boosting the outlook for Baobab is its project's location in the richly endowed Tete province.

The province hosts some of the largest undeveloped coal reserves on the planet, with estimates pointing towards the area producing up to 20% of the world's coking coal by 2015.

Immediately south of Baobab's tenure are 15 billion tonnes of coking and thermal coal being brought into production by the aforementioned big hitters, along with AIM-listed Beacon Hill Resources, Ncondezi Coal and Eurasian Natural Resources Corp.

For Baobab, this means infrastructure development is in full swing, providing it with great opportunities for rail, water, and export as it moves closer to development.

Low tariff hydro-electric power is available from the 2075 megawatt Cahora Bassa dam and studies are underway to expand the dam's capacity by an additional 1300MW. A new 1500MW scheme at Mphanda N'kuwa is due to commence production in 2015.

"We may be able to negotiate tariff rates at a third, if not a quarter, of typical power generation costs in Australia or west Africa, which will have a significant impact on future operating costs," James said.

"Baobab has a unique opportunity to become involved in Mozambique's new iron and steel industry.

"It's all about location. Mozambique is uniquely located to access critical infrastructure and complementary resources."

To bring Tete to production, Baobab has beefed up its development team.

The PFS will be coordinated out of Australia by project manager Christian Kunze.

Kunze, a mechanical engineer, has 20 years international management experience in iron ore project development, plant engineering and steel manufacture.

The mineral processing component of the study will be supervised by consultant John Clout, a leader in iron ore petrography, metallurgy, beneficiation, downstream processing and marketing.

Clout was previously head of resource strategy at Fortescue Metals Group and is an ex-CSIRO manager. He has advised on mineral processing to companies including Rio, BlueScope, OneSteel, Robe River, Hancock Prospecting and WISCO.

Coffey Mining will complete the resource, mining and environmental aspects of the PFS while SNC-Lavalin is the engineering and infrastructure consultant.

The company announced that the International Finance Corporation, Baobab's strategic partner in the Tete project, has committed its 15% contributing interest in exploration expenses.

The IFC, part of the World Bank Group, makes investments in exploration and mining companies which operate in developing countries.

James said Baobab welcomed discussions from potential strageic investors, in either the project or at the equity level.

"We have two of the world's largest mining companies operating on our doorstep and there are rumours that Anglo American will be joining them," he said.

"On top of that, we have four of the world's tier one steel companies with operations in the vicinity.

"So, the top ten on our wish list for potential strategic partners or investors are already operating in or near the Tete province."

*A version of this report, first published in the March 2012 edition of RESOURCESTOCKS magazine, was commissioned by Baobab Resources