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Rio Tinto, WCS, Guinea government to develop Simandou iron ore mine infrastructure


Lack of infrastructure accord previously held up development

Simandou output may be largely directed at China

  • Author
  • Diana Kinch
  • Editor
  • Aastha Agnihotri
  • Commodity
  • Energy Transition Oil Metals

Miner Rio Tinto's subsidiary Rio Tinto Simfer and the Winning Consortium Simandou, or WCS -- both of which hold rights to blocks in Guinea's major Simandou iron ore deposit -- have set up a company together with the government of the Republic of Guinea to develop multi-user infrastructure for the iron ore project.

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La Compagnie du TransGuinéen (The TransGuinean Company) will progress the Simandou shareholder agreement and allow financing to be secured to construct a strategic corridor with more than 600 kilometers of rail infrastructures extending from south to south-west of the Republic of Guinea, as well as port infrastructure in the Forecariah prefecture in Maritime Guinea, Rio Tinto said in a July 28 statement.

"WCS and Rio Tinto Simfer, the holders of blocks 1-2 and 3-4 respectively, are fully engaged with all stakeholders at national and local level to transform the iron ore potential of the Simandou mountain range into a sustainable source of wealth for the people of Guinea for generations to come," Rio Tinto stated. "The parties will now work on next steps including shareholding agreement, finalizing cost estimates and funding, and securing all necessary approvals and other permits and agreements required to progress the co-development of infrastructures."

Development of Simandou – classed as the world's largest undeveloped resource of high quality iron ore, containing some 4 billion mt -- has been dogged for well over 10 years over concerns related to lack of costly infrastructure, licensing and legal issues and even a corruption scandal relating to a previous would-be developer. The government has ordered two suspensions of the project so far this year due to failure by the parties concerned to reach agreement on the logistics deal, according to local and international media reports.

Simandou's eventual production potential has been put at 200 million mt/year of high-grade iron ore, which could be expected to assist mainly Chinese integrated steelmakers in their decarbonization drive. Use of high grade ore can reduce the quantities of iron ore used in the blast furnace, thus reducing steelmakers' carbon emissions.

Global seaborne iron ore trade currently amounts to around 1.5 billion mt/year, with Rio Tinto, Vale, BHP, FMG and Anglo American major contributors to the total.

Rio Tinto did not immediately give any estimate of the funds needed for the infrastructure development July 28. Previous estimates of the cost of building the infrastructure necessary to get the ore to international markets range between $5 billion and $10 billion, it being widely assumed that the foreign-owned mine developers would foot the bill. The website reported earlier this year that the Guinean government was to reach a $15 billion deal for 35 years with Rio Tinto and the Winning consortium to resume the Simandou iron ore project.

Seaborne iron ore prices continued to rise July 28 on the back of optimistic steel data as well as macro policies in China aimed at providing support to the property market.

The 62% Fe Iron Ore Index was at $117.95/dry mt CFR North China July 28, up $6.90/dmt from July 27, according to the Platts assessment by S&P Global Commodity Insights.

Project 'milestone'

Creation of the logistics company, fully registered in Guinea, is seen as a significant milestone in implementation of a framework agreement signed by the parties concerned on March 25, Rio Tinto said. Simfer Jersey Ltd. and WCS will each hold a 42.5% equity stake in the company, with the Guinea government taking a 15% free carry equity stake.

The Simfer joint venture comprises Simfer SA, the holder of Simandou South Blocks 3 & 4, which is owned by the government of Guinea (15%) and Simfer Jersey Limited (85%). In turn, Simfer Jersey Limited is a joint venture between the Rio Tinto Group (53%) and Chalco Iron Ore Holdings (CIOH) (47%) – a Chinalco-led joint venture of leading Chinese SOEs (Chinalco (75%), Baowu (20%), China Rail Construction Corporation (CRCC) (2.5%) and China Harbour Engineering Company (CHEC) (2.5%).

Simandou is expected to deliver over 100 million tons per year of iron ore for Rio Tinto.

WCS is a consortium of Singaporean company Winning International Group (45%), Weiqiao Aluminium (part of the China Hongqiao Group) (35%) and United Mining Suppliers International (20%). WCS is the holder of Simandou North block 1-2 (with the government of Guinea holding a 15% interest in the mining vehicle and WCS holding 85%) and associated infrastructure. The consortium had previously said it aims to produce 60 million mt/year of high grade iron ore by 2026 from Blocks 1 & 2, potentially rising to 110 million mt/year in a later phase.

WCS chairman Sun Xiushun said creation of La Compagnie du TransGuinéen builds a solid foundation for realization of the Simandou project, while Rio Tinto executive committee member in charge of the Simandou project, Bold Baatar said the new company's incorporation "underscores the importance of the Simandou resource in today's decarbonizing world, and its development will complement Rio Tinto's strong iron ore portfolio." The infrastructure corridor may bring significant benefits for regional economic development, he said

Djiba Diakité, minister director at Guinea's presidency, said the country "remains open to all responsible and serious mining investment that will help support the sustainable development of our economy and, in turn, is committed to maintaining a stable and calm business climate."