DUBAI: A Mauritanian affiliate of Industries Qatar said yesterday it is moving ahead with a $2.1 billion iron ore plant in the Saharan state after completing a feasibility study.

State-controlled Industries Qatar's subsidiary, Qatar Steel, bought 49.9pc of the Al Qalb Al Og iron ore venture in northern Mauritania for $375 million in November after larger Gulf rival Saudi Basic Industries Corporation pulled out, saying returns would be too low.

According to the study published earlier this month for the developers, which also include Australia's Sphere Investments and Mauritania's state-owned iron ore firm Societe Nationale Industrielle et Miniere, the scheme's capital costs will be $2.14bn.

A prelimary study in February said project costs would rise 13pc to $2.15bn from $1.9bn due to "cost escalation".

The consortium has won a 30-year exploitation licence for the project operating company, Qatar Steel said.

The project will target 7m tonnes a year of direct reduction pellet.

"As part of its acquisition of 49.9 percent of the project, Qatar Steel is entitled to the equivalent off-take from the project on an annual basis," the firm said.

The remainder will be sold on to North African and Middle East producers, it said.

Demand for steel in the Gulf region is surging as governments pour more of their record oil revenues into infrastructure, tourism and real estate.

Contractors in the region are working on more than $2.4 trillion of projects, according to Dubai-based consultancy Proleads.

Qatar Steel sold about 1.5m tonnes of steel in 2007 and is looking to double sales by 2012, according to its end of year financial results.