Rio Tinto Cleared to Resume Simandou Operations in Guinea
PUBLISHED
2022-03-28
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Guinea’s ruling junta has reached an agreement with Rio Tinto and a Chinese-backed group to resume development work at the huge Simandou iron ore deposit.
Agreement was confirmed by the Junta’s mines minister said, after resolving infrastructure disputes.
Development of a major iron ore mining province at Simandou has been touted by China as a rival to Australia’s Pilbara iron ore export industry of Western Australia.
Some media reports said the junta has reached a $US15 billion deal with Rio Tinto and an Asian-Guinean consortium to exploit the Simandou iron ore deposits in the southeast of the country.
The three-way deal was signed late Friday, according to Reuters and has a 35-year duration for co-development by Rio Tinto and the Singapore-led Winning Consortium.
Blocks 1 and 2 of the Simandou deposit were attributed to the Winning Consortium and Blocks 3 and 4 to Rio Tinto
The new contract covers “infrastructure, mining development, the port”, according to Fadi Wazni, head of the Winning Consortium, speaking to the Guinean public broadcaster RTG on the weekend.
It provides for the construction of a 670-kilometre railway to link between the mining area and a port on the Guinean coast south of Conakry.
The railway and deep water port are expected to be completed by December 2024, according to the terms of the agreement announced on RTG.
The first commercial production is expected by March 2025 at the latest.
Mines Minister Moussa Magassouba said on state television on the weekend that the government had negotiated and obtained 15% stakes in the rail, port and mines, while the new infrastructure would become Guinean state property upon completion.
“This framework agreement will allow the joint development of this gigantic project ... and allow the acceleration of the process and a resumption of work," Mr Wazni added.
“The framework clearly outlines the key principles for all parties to work together on the co-development of infrastructure and sets out how the project will be built to international Environmental, Social, and Governance standards,” Bold Baatar, Rio Tinto’s head of Copper said in statement, according to Reuters.
Rio Tinto has held rights to Simandou since 1997. It owns a 45.05% stake in the southern half, Blocks 3 and 4, of the deposit, with Chinalco holding 39.95% and Guinea's government the remaining 15%.
SMB-Winning won a government tender in November 2019 for Blocks 1 and 2.
Once it is fully up and running, Simandou is expected to produce 100 million tonnes of iron ore a year - with blocks 1 and 2 producing 60 million tonnes a year and Rio’s blocks producing 40 million a year.
That compares to the more than 800 million a year produced by Australian miners including Rio, BHP, Roy Hill and Fortescue Metals.
Rio Tinto is allied with Chinese aluminium corporation Chinalco (rio’s biggest shareholder) in a joint venture to exploit the deposit and Singapore’s Winning Shipping with Chinese aluminium producer Shandong Weiqiao, the Yantai Port Group and Guinean company United Mining Supply.
Earlier this month the Junta ordered Rio to stop all work on its Simandou project - an order that now looks like a negotiating tactic.
Rio already produced and exports bauxite from Guinea in a venture with Bauxite producer CBG which is 51% owned by consortium Halco Mining Inc and 49% owned by the Guinean government.
Rio Tinto and Alcoa Corp each hold 45% of Halco, while Dadco Investments holds the rest.
The market pushed the shares up 1.3% to $118.47. They have heard talk about Simandou in the past and been disappointed and want Rio to put some runs on the board.