Rio’s Walsh says settlement with Guinea over Simandou imminent
World number two miner Rio Tinto (LON, ASX: RIO) is likely to reach an agreement with Guinea’s government on the southern part of the $20 billion Simandou iron ore project by December or in early 2014, CEO Sam Walsh told Reuters.
According to the executive, Guinea has appointed a new legal firm, based in Canada, which will help develop a legal framework to let the multi-billion dollar project take off.
While the original 2015 production deadline may not be met, both Rio Tinto and Guinea's authorities have repeatedly said they are confident of investor commitments to fund the costly infrastructure on the southern half of the giant Simandou iron ore mine, which includes rail, roads and a port.
For months the mining giant and the West African country’s government have been debating how to combine a 2011 settlement deal, which ended antagonisms after Rio was ejected from Simandou's northern portion in 2008, leaving the door open for Israeli billionaire Beny Steinmetz’s BSG Resources to take over.
In 2010, BSG Resources sold 51% of its stake to Brazil’s Vale (NYSE: VALE) in a deal valued at as much as $2.5 billion. But all work on their section has been halted since September this year, as the government of Guinea under democratically elected president Alpha Condé revisits all mining contracts entered into under previous military regimes and dictatorships.
So far Rio has already spent over $3 billion building open pits in the southern part of what is considered one of the world's largest untapped deposits of iron ore. But the scale and scope of the development has been placed in doubt by the fall in the price of iron ore and a looming supply glut.
At full production Rio's Simandou mine would export up to 95 million tonnes per year – that's a third of the firm's total capacity at the moment.