Posted on January 10, 2024
The world’s biggest mining project, a $20 billion iron ore, rail and port development will commence operations in Guinea, after a 27-year wait beset by setbacks, and scandals.
According to the Financial Times, the United Kingdom-listed mining corporation, Rio Tinto first secured an exploration licence in the Simandou mountains in south-eastern Guinea, 550km from the coastal capital, in 1997.
Since then the country of 13 million people has had two coups d’état, four heads of state and three presidential elections.
As the years spanned, Rio Tinto has had six chief executives, lost half the licence, fought drawn-out court battles with several corporate rivals, settled corruption allegations with the United States authorities and even sought to exit the project completely, only for the sale to fall through.
Finally, in 2024, once Rio Tinto’s state-owned Chinese partners received the last approval from Beijing, the Anglo-Australian miner intends to begin the most complex project in its history.
“There is nothing else out there of this scale and size,” Rio Tinto’s Bold Baatar told the Financial Times in a recent interview.
Although he is officially head of the copper business, for the past seven years Baatar has been the executive responsible for hauling the project’s complex commercial agreements over the line.
It was reported that the project has become a partnership among Rio Tinto, the Guinean government, and at least seven other companies including five from China, as it was too expensive for any single miner to develop alone.
Also, Rio Tinto will build one iron ore mine — known as the Simfer project — in partnership with a consortium led by the world’s largest aluminium producer, Chinalco.
A second mine — known as the WCS project — will be built by Baowu, the world’s biggest steel producer, in partnership with a consortium led by Singapore-based Winning International Group.
The Financial Times, at the same time, the parties will co-finance the construction of a 552km railway that will curve through Guinea’s mountainous interior to the sea and the development of a deepwater port on its Atlantic coast.
The corporation and the Chinalco consortium must also fund an additional 70km rail spur to connect its mine with the main line.
Rio Tinto’s share of the total cost is forecast to be $6.2 billion, more than the company’s entire annual capital expenditure in some of the past five years.
For Baatar, the complex partnership structure at Simandou offers a template for a “new era in co-development” that will be necessary to source the vast volumes of metal required to build the green economy of the future.
“Historically, when you look at the mining industry, each mine had their own infrastructure. The capital number is so big for any single party,” Baatar said.
Seven years ago, after several problems, Rio Tinto sought to exit the project, agreeing to sell its stake to Chinalco for up to $1.3 billion. Ultimately Beijing, which has to approve foreign investments and divestments by state-owned enterprises, never approved the deal and the project remained on Rio Tinto’s books.
The difference between 2016 and today is that Simandou’s high-grade ore is now even more attractive, given the need to decarbonise steelmaking, according to Baatar.
“The fundamental shift in the last number of years has been that the world is far more in agreement on climate change,” he said.