Rio Tinto Brings Simandou Guinea Iron Ore Saga to End
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Rio Tinto is ready to resume construction at its vast Simandou iron ore operation in the Republic of Guinea. It will be the world’s largest iron ore mining project when it becomes operational, and is being developed with a Chinese consortium
Simandou comes with 2bn tonnes of some of the world’s highest-grade iron ore. The mine will add around 5% capacity to global seaborne supply – a measure of iron ore levels transported by maritime trade – when it comes on line.
Rio Tinto owns two of the four Simandou mining blocks as part of its Simfer joint venture with China’s Chalco Iron Ore Holdings (CIOH) and the government of Guinea. Rio Tinto holds a 53% stake, while CIOH holds the rest.
Simandou is one of mining’s longest running sagas. Rio Tinto first secured an exploration licence for Simandou in 1997, since which time the country has seen two coup d’états, four heads of state and undergone three presidential elections.
Then in 2020, Rio Tinto, Chinalco and the International Finance Corporation agreed on a deal to develop Guinea’s iron-ore deposits into a $20-billion project that would make it the biggest infrastructure project in Africa.
Simandou mired in complexity since 1997
But that deal became mired in environmental and social complexities.
The project involves the construction of a 552km rail line to transport the iron ore from two new mines in the Simandou mountains to a new deep water port on Guinea’s Atlantic coast.
But the deposit sits among rainforests rich in tropical species. The railway needs to traverse hills and valleys, and will require the relocation of local communities, causing heightened scrutiny from investors.
Things have also been complicated by an ongoing geopolitical spat between China and Australia over control of natural resources, which has put Rio in an uncomfortable position.
Rio Tinto estimates the development requires initial funding of about $11.6bn, and the company says CIOH has “fulfilled its financial obligations” by making two payments to cover its share of capital expenditures for critical works.
The economic benefits are sizable for Guinea. Once fully operational, the mine is expected to contribute an estimated $7.6bn to the Guinean economy each year.
A second mine, the WCS project, will be built by Baowu — the world’s largest steel producer — in partnership with a consortium led by Singapore-based Winning International Group.
Simandou massive boost to Guinea economy
Simandou is slated to begin commercial production by the end of 2025, adding an annual supply of around 120 million tonnes of high-quality iron ore after it reaches full capacity.
Rio Tinto, which reported second-quarter iron ore shipments below analyst estimates earlier on Tuesday, said its share of expected capital investment remaining to be spent in Simandou now sits at $5.7 billion, counting from the beginning of 2024.
Rio Tinto Executive Committee lead for Guinea and Copper Chief Executive Bold Baatar said: “We thank the Government of Guinea, Chinalco, Baowu and WCS for their partnership in reaching this milestone towards developing the world class Simandou project.
“Simandou will deliver a significant new source of high-grade iron ore that will strengthen Rio Tinto’s portfolio for the decarbonisation of the steel industry, along with trans-Guinean rail and port infrastructure that can make a significant contribution to the country’s economic development.”
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