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Rio Tinto has announced the green light to resume construction on its expansive Simandou iron ore project in Guinea, in collaboration with a Chinese consortium. This milestone marks a significant step forward for what is set to become the world’s largest and highest-grade new iron ore mine.
Simandou is projected to contribute around 5% to the global seaborne iron ore supply once operational. Rio Tinto controls two of the four mining blocks through its joint venture, Simfer, with China’s Chalco Iron Ore Holdings (CIOH) and the Guinean government. The mining giant holds a 53% stake, while CIOH owns the remaining share. The second segment of the project will be developed by Baowu, the world’s leading steel producer, in partnership with a consortium spearheaded by Winning International Group. The journey to this point has been long and tumultuous. Rio Tinto first obtained an exploration license for Simandou in 1997. Since then, Guinea has experienced significant political upheaval, including two coup d’états, four different heads of state, and three presidential elections.
Additionally the project entails constructing a 552km railway to transport iron ore from the Simandou mountains to a new deep-water port on Guinea’s Atlantic coast. The estimated cost for the initial phase of development is about $11.6 billion. Rio Tinto plans to allocate a significant portion of its annual capital investment, approximately $10 billion from 2024 to 2026, to Simandou as it concludes its investments in the Oyu Tolgoi project in Mongolia. CIOH has met its financial commitments, recently making payments totaling $985 million to cover capital expenditures for critical works. These payments cover all incurred expenses up to the current date.
However, over the past 27 years, Simandou has encountered numerous delays due to legal battles, political instability, and the complex logistics and costs associated with building extensive rail and port infrastructure. Despite these hurdles, the project is now moving forward, with commercial production expected to commence by the end of 2025. At full capacity, Simandou aims to deliver an annual output of approximately 120 million tonnes of high-quality iron ore.
Conclusively, Rio Tinto’s expected remaining capital investment for Simandou stands at $5.7 billion from the beginning of 2024. The infrastructure developed will be equally divided between Simfer and the WCS project, with each focusing on different blocks of Simandou to collectively achieve a 60 million tonne per year output. As Simandou advances towards operational status, it is poised to significantly impact the global iron ore market, solidifying its position as a major player in the industry.