Less than 24 hours after Australian newspaper Sydney Morning Herald published that Rio Tinto (LON:RIO) had decided to slow the pace at its multi-billion investment in Guinea's Simandou iron ore project, Financial Times (subs. required) is reporting the miner is doing its best to hold on to the world’s richest untapped deposits of the steel making commodity.
The Anglo-Australian miner and Guinea’s government have locked horns over an agreement signed by the parties in 2011, which states the African country has the option, but not the obligation —as Rio earlier claimed – to acquire a 35% stake in the Simandou mine and a 51% stake in the port and rail infrastructure.
Simandou, expected to cost more than $10 billion, is proving too costly for Rio Tinto, which is currently focused on getting rid of non-core operations to curb costs and bolster its balance sheet.
The miner needs the West African country to progress on financing and the agreement underpinning the project before it can move ahead. Otherwise, Rio risks missing the 2015 deadline to start shipping ore from Simandou and, as a result, its license could be revoked.
This would not be the first time something like this has happened to Rio in Guinea, as the miner — which has held the deposit since the mid-1990s — lost half the rights in 2008, reports FT.com.
Rio Tinto, together with its partners Aluminum Corp. of China Ltd. (ACH) and the International Finance Corporation, are said to be currently waiting for an investment agreement to become statutory law before moving forward with the mining venture.
Image of the Simandou project from archives