Guinea clears Simandou iron ore project to continue

UK-Australian mining firm Rio Tinto has reached a framework agreement with Guinea's interim military government and its Chinese partner SMB-Winning designed to allow progress to continue on one of the most advanced iron ore projects in west Africa.

Guinea's interim president Mamady Doumbouya, who took over in a military coup in September, ordered work on the high-grade Simandou iron ore project in Guinea to stop on the ground two weeks ago, while he satisfied himself that the project and associated infrastructure was being developed in his country's best interests.

Rio Tinto, SMB-Winning subsidiary WCS and the Doumbouya government have now reached a framework agreement that outlines the principles for how the three will work together to build a 650km rail link and deepwater port that will allow ore from Simandou to be exported, according to Rio Tinto's copper chief executive Bold Baatar.

"We look forward to continuing to work with the government and WCS to finalise a definitive agreement aligned with this framework, which brings us a step closer to achieving mutual prosperity for Guinea and all stakeholders," Baatar added.

The development of the west African iron ore deposits will allow Chinese steel producers to reduce their reliance on seaborne ore from Australian and Brazil.

Rio Tinto owns 45.05pc of blocks 3 and 4 at Simandou, with Chinese aluminium producer Chinalco holding 39.95pc and Guinea's government the remaining 15pc. SMB-Winning won a government tender for blocks 1 and 2 in late 2019 and plans to get the first ore shipment to market by 2025.

SMB-Winning is a consortium comprising Chinese aluminium producer Shandong Weiqiao, China's Yantai Port, transport and logistics company UMS International and Singapore's Winning Shipping.

Rio Tinto restarted work on the project in August 2020, four years after it wrote $1.8bn off the value of the project. Simandou is a forerunner in the west African iron ore sector, with the Mbalam project on the Cameroon-Congo (Brazzaville) border entangled in court cases surrounding a change of ownership.

Simandou could deliver 150mn t/yr of fines and lump with an average grade of 65pc Fe, which would attract a significant premium to the 60-62pc Fe shipped from Australia's Pilbara.

Argus last assessed the 65pc Fe price at $177.40/dry metric tonne (dmt) cfr Qingdao on 25 March, up from $105.15/dmt on 16 November but down from a high of $265.80/dmt on 12 May.

By Jo Clarke

Iron ore prices ($/dmt)