A joint venture named La Compagnie du TransGuinen was incorporated by the government of the Republic of Guinea, Winning Consortium Simandou (WCS) and Rio Tinto Simfer on July 27 to further progress plans to co-develop infrastructure for the Simandou iron ore project including a railway and port, Rio Tinto said in official statement released on the same day. The Simandou iron ore project is to tap what is purportedly the world’s largest undeveloped iron ore deposit.
The joint venture incorporation is a significant milestone in “the implementation of the framework agreement signed among the parties” in March this year, Rio Tinto said.
Consequently, “the parties will now work on next steps including shareholding agreement, finalising cost estimates and funding, and securing all necessary approvals and other permits and agreements required to progress the co-development of infrastructures,” according to the statement.
The development of infrastructures includes constructing a strategic corridor with more than 600 kilometres of rail infrastructures extending from south to south-west of the Republic of Guinea, as well as port infrastructure in Forécariah prefecture in Maritime Guinea, Rio Tinto said.
The shareholding of La Compagnie du TransGuinéen will be split between development partners Simfer Jersey Ltd. and WCS, with each receiving a 42.5% equity share, while the Government of Guinea takes a 15% free carry equity stake, Rio Tinto noted.
The Simandou mine, located in Guinea’s southern Nzérékoré Region, with proven and probable resources at 2.76 billion tonnes and an Fe content at around 65.5%, according to Rio Tinto.
For years, the development of Simandou has been stymied for multiple reasons such as the labyrinthine legal disputes between miners and government, political changes of Guinea government and the absence of infrastructure to export the mineral, Mysteel understands.
After decades of repeated ownership changes, the project’s future seemed to become brighter in 2020 after the China-backed SMB-Winning consortium, a consortium of Winning International Group from Singapore, Weiqiao Aluminium (part of the China Hongqiao Group) and United Mining Suppliers International, signed a deal to develop the northern part of the site (Blocks 1-2), including the construction of railway and ports infrastructure through its WCS.
The southern half of the deposit – blocks 3-4 – is held by Rio Tinto and Chalco Iron Ore Holdings – a Aluminum Corporation of China (Chinalco)-led joint venture of Chinese state-owned enterprises, namely Chinalco, China Baowu Steel Group, China Rail Construction Corporation and China Harbour Engineering Company.
However, the development was placed in limbo earlier this year when Guinea’s military government suspended all work at Simandou in mid-March to promote another round of discussions with Rio Tinto and WCS. This led to a framework agreement under which the firms would “co-develop” infrastructure for the mine, including a 670 kilometer railway and a port to cost.
Subsequently, in an extension of a previous deadline the Guinean government gave the companies 14 days from June 19 to agree on a joint venture. In early July, the local government suspended the construction again after the two companies missed the extended deadline to agree on the joint venture, Mysteel Global noted.
“(This) development will complement Rio Tinto’s strong iron ore portfolio,” Rio Tinto said. The miner wants to expand its iron ore supply longer term, and China – the world’s steel producer and iron ore consumer – is also betting that the project will help to ensure stable supplies of steelmaking raw materials for the healthy development of its domestic steel industry, Mysteel Global notes.
China recently established a state-owned entity named China Mineral Resources Group Ltd, whose business scope includes mining.
Written by Victoria Zou, zyongjia@mysteel.com
This article has been published under an article exchange agreement between Mysteel Global and SteelMint.
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