CONAKRY (Times Of Ocean)- As Guinea’s ruling junta seeks clarification regarding how Guinea’s interests will be protected, all activities at the massive Simandou iron ore deposit, owned by Rio Tinto and a Chinese-backed consortium, have been halted.
In the south-eastern corner of Guinea, Simandou is the largest known deposit of its kind, holding more than 2 billion tonnes of high-grade ore, but its development has been stalled by long-running legal disputes and the cost of infrastructure.
Guinea’s interim government said in a statement read on national television late on Thursday that interim president Mamady Doumbouya, who took power in a military coup in September, had not seen any progress on the project.
“He therefore ordered the cessation of all activity on the ground pending the answers to questions posed to various actors and the clarification of the operational mode by which the interests of Guinea will be preserved,” government spokesperson Ousmane Gaoual Diallo said.
The companies involved in the project – Rio Tinto (RIO.L), (RIO.AX), Winning Consortium Simandou (WCS) and Chinalco did not immediately respond to requests for comment.
After the September coup, mining and exploration companies in Guinea had said their activities were unaffected and that the new leaders had taken a more positive approach to mining.
Soon after seizing power, the junta said it would “respect all mining agreements”.
CRU Group estimates Simandou could produce 150 million tonnes of iron ore per year, propelling the country into the top five global suppliers of seaborne iron ore.
In response to a trade war between Beijing and Canberra, Simandou is a strategic asset for China in its development of alternatives to Australian iron ore. Because it produces less waste and energy than low-grade iron ore, high-grade iron ore is prized worldwide as it reduces steelmaking costs and emissions.
THE ‘TRANSGUINEAN’ QUESTION
Rio Tinto has held rights to Simandou since 1997. It has a 45.05% stake in Blocks 3 and 4 of the deposit, with Aluminium Corp of China (Chinalco) holding 39.95% and Guinea’s government holding 15%.
In November 2019 the Simandou government awarded Blocks 1 and 2 to a consortium backed by China.
With WCS, the mine and associated infrastructure will be developed, and the company has stated that it aims to bring the first iron ore to market by 2025, a timeline that analysts say is ambitious.
The source at Guinea’s mines ministry told Reuters that the government was hoping Rio Tinto and WCS would reach an agreement to work together.
In order to get Simandou ore to market, a 670-kilometre “Transguinean” railway is being built to connect the two companies.
Guinea’s government has said developers of the mine must build a railway spanning the country, even though it adds significantly to the cost and the route to port through Liberia is shorter.
Previously, Rio Tinto said it would collaborate with those who build the infrastructure, and CEO Jakob Stausholm stated in October that he saw the development as a whole.
Rio provided an update on the Simandou project in its 2021 financial results statement, noting that it continues to engage with stakeholders, including the government of Guinea, that drilling has begun, and that construction and early development work are expected to be completed this year.
According to a Reuters investigation last year, WCS began blasting a railway tunnel in a habitat for critically endangered chimpanzees with no plan to mitigate the impact on the animals.
At the time, Rio declined to comment on the construction works, saying its rail solution was still in study.