The formation of a joint venture to develop the Simandou iron ore project's rail and port components may see work at the west African project restarting, following a halt earlier this month.
The joint venture TransGuinean involves the Guinean government, China's SMB-Winning subsidiary Winning Consortium Simandou (WCS) and Rio Tinto Simfer, UK-Australian miner Rio Tinto said on 28 July. The venture will facilitate investment decisions for the co-financing and co-development of the Simandou infrastructure.
The shareholding of TransGuinean will be split between development partners, with Simfer Jersey and WCS each receiving a 42.5pc equity share and the government of Guinea taking a 15pc free-carry equity stake. Simfer Jersey is a joint venture between the Rio Tinto and China's Chalco Iron Ore — a joint venture of leading Chinese state-owned enterprises including Chinalco, Baowu, China Rail Construction (CRCC) and China Harbour Engineering.
Guinea's interim military government ordered work at the project to stop earlier this month, following a previous halt in March.
WCS had won the tender to develop the Simandou iron ore blocks 1 and 2 in 2019. Simandou deposits are estimated to constitute the largest unexploited reserve of high-quality iron ore, with blocks 1 and 2 accounting for more than 1.8bn t of estimated reserves.
Australia accounted for around 62pc of China's 1.12bn t of iron ore imports last year, while Brazil accounted for 21pc of the imports.
The Chinese government aims to reduce its dependence on imported iron ore through the development of domestic production and purchase of stakes in overseas mines. Australian iron ore imports have not come under the scope of China's informal ban on the imports of some Australian commodities, including metallurgical coal, following a political rift in 2020.
China's demand for high-grade iron ore moved up structurally following the 2016 supply-side reforms rolled out for the steel sector. The Argus 65pc iron ore and 62pc iron ore grade spread has remained over $10/t since 2016, when it averaged $6.76/t. The year-to-date spread stands at $23.92/t.
