Guinea’s ruling junta has reached an agreement with Rio Tinto and a Chinese-backed consortium to resume activities at the huge Simandou iron ore deposit, the mines minister said, after resolving infrastructure disputes.
Simandou holds more 4 billion tonnes of ore according to Guinea’s government, making it the largest known deposit of its kind, but despite the ore being very high-grade, Simandou remains untapped decades after its discovery, largely due to legal disputes and political instability.
Guinea’s transitional authorities said this month that the site’s development would be halted as they sought clarification on how Guinea’s interests would be preserved.
The government’s move was seen as a way to put pressure on Rio and Winning Consortium Simandou to find a way to collaborate on the costly infrastructure needed to transport ore from Simandou to the port.
Mines Minister Moussa Magassouba said on state television late on Saturday that a framework agreement had been signed between the government and companies involved in the project: Rio Tinto, the Aluminium Corp of China (Chinalco) and the Chinese-backed SMB-Winning consortium.
He said the companies had “put aside many egos, many other interests to return to what is a win-win partnership for all parties.”
Magassouba said infrastructure projects must be completed by December 2024 and commercial production must start by March 31, 2025, a timeline analysts say is ambitious given the scale of the infrastructure that needs to be built.
The agreement primarily concerned developing a 670 km (419 mile) railway from the Simandou site to a new deep water port, a plan that Magassouba said would cost about $15 billion.
He said 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,” Fadi Wazni, chairman of SMB-Winning consortium board, said.
“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.
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, JP Morgan analysts said earlier this month.
(By Saliou Samb, Helen Reid and Cooper Inveen; Editing by Bate Felix and Elaine Hardcastle)