Rio Tinto and China Baowu agree on Simandou infrastructure
Giant iron ore deposit in Guinea a step closer to development after parties sign term sheet for associated rail and port facilities
05 January 2023 - 13:06
by Agency Staff
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The Simandou mountain rises above Beyla, Guinea. The remote southeastern corner of the country has some of the planet's finest iron ore. Picture: REUTERS/Saliou Samb
Rio Tinto’s Guinea unit has agreed terms with joint venture partners including China Baowu Steel Group to develop infrastructure for the huge Simandou iron ore mine, the next step towards building a project in which it has held a stake since 1997.
Simandou, the world’s largest undeveloped project for iron ore, is situated in a remote corner of Guinea and the challenge of transporting high-grade iron ore from the mine to market has long hindered its development. Guinea’s government requires any developer to build a 600km railway to the coast.
Rio Tinto’s Guinea unit formed a joint venture last July with Winning Consortium Simandou (WCS) and the Guinean government to develop that rail and port infrastructure.
A company spokesperson said they and Baowu Resources have signed a non-binding term sheet as the next step towards achieving the shareholder agreement, cost estimates and regulatory approvals needed to push ahead with the project.
The companies didn’t give any details of the terms of the agreement. Rio Tinto said the project partners committed through the term sheet to it meeting “internationally recognised ESG standards” and helping Guinea benefit economically.
Top Chinese steelmaker China Baowu Steel Group said in a statement on its WeChat account on December 24 that its subsidiary had entered into a term sheet for Simandou infrastructure.
China Baowu said it would speed up the negotiation of the shareholder agreement, lead the formation of the Bao Consortium and implement project financing, and accelerate the project's development.
The Bao Consortium plans to invest in WCS to hold 49% of WCS InfraCo and WCS MineCo, Baowu said, without saying how much it will spend on the stakes. It plans to increase its shareholding in WCS MineCo to 51% once the mine is operational.
“Baowu’s entry to the project is a positive signal for the importance of Simandou and the long-term attractiveness of its high-grade, low-impurity iron ore,” said Gerard Rheinberger, Rio Tinto’s MD for Simandou.
Spokespersons for WCS and Guinea’s mines ministry did not immediately respond to a request for comment.
WCS, a consortium of Singapore-based firm Winning International Group (45%), China Hongqiao subsidiary Weiqiao Aluminium (35%) and Guinean company United Mining Suppliers International (20%), won the rights to Simandou blocks 1 and 2 in November 2019.
Rio Tinto has held rights to Simandou blocks 3 and 4 since 1997 through Simfer S.A., which is owned by the government of Guinea (15%) and Simfer Jersey Ltd (85%), itself a joint venture between Rio (53%) and Chalco Iron Ore Holdings (CIOH) (47%).
CIOH is held 75% by Aluminum Corporation of China (Chinalco) and 20% by Baowu, with China Rail Construction Corporation and China Harbour Engineering Company each owning 2.5%.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Rio Tinto and China Baowu agree on Simandou infrastructure
Giant iron ore deposit in Guinea a step closer to development after parties sign term sheet for associated rail and port facilities
Rio Tinto’s Guinea unit has agreed terms with joint venture partners including China Baowu Steel Group to develop infrastructure for the huge Simandou iron ore mine, the next step towards building a project in which it has held a stake since 1997.
Simandou, the world’s largest undeveloped project for iron ore, is situated in a remote corner of Guinea and the challenge of transporting high-grade iron ore from the mine to market has long hindered its development. Guinea’s government requires any developer to build a 600km railway to the coast.
Rio Tinto’s Guinea unit formed a joint venture last July with Winning Consortium Simandou (WCS) and the Guinean government to develop that rail and port infrastructure.
A company spokesperson said they and Baowu Resources have signed a non-binding term sheet as the next step towards achieving the shareholder agreement, cost estimates and regulatory approvals needed to push ahead with the project.
The companies didn’t give any details of the terms of the agreement. Rio Tinto said the project partners committed through the term sheet to it meeting “internationally recognised ESG standards” and helping Guinea benefit economically.
Top Chinese steelmaker China Baowu Steel Group said in a statement on its WeChat account on December 24 that its subsidiary had entered into a term sheet for Simandou infrastructure.
China Baowu said it would speed up the negotiation of the shareholder agreement, lead the formation of the Bao Consortium and implement project financing, and accelerate the project's development.
The Bao Consortium plans to invest in WCS to hold 49% of WCS InfraCo and WCS MineCo, Baowu said, without saying how much it will spend on the stakes. It plans to increase its shareholding in WCS MineCo to 51% once the mine is operational.
“Baowu’s entry to the project is a positive signal for the importance of Simandou and the long-term attractiveness of its high-grade, low-impurity iron ore,” said Gerard Rheinberger, Rio Tinto’s MD for Simandou.
Spokespersons for WCS and Guinea’s mines ministry did not immediately respond to a request for comment.
WCS, a consortium of Singapore-based firm Winning International Group (45%), China Hongqiao subsidiary Weiqiao Aluminium (35%) and Guinean company United Mining Suppliers International (20%), won the rights to Simandou blocks 1 and 2 in November 2019.
Rio Tinto has held rights to Simandou blocks 3 and 4 since 1997 through Simfer S.A., which is owned by the government of Guinea (15%) and Simfer Jersey Ltd (85%), itself a joint venture between Rio (53%) and Chalco Iron Ore Holdings (CIOH) (47%).
CIOH is held 75% by Aluminum Corporation of China (Chinalco) and 20% by Baowu, with China Rail Construction Corporation and China Harbour Engineering Company each owning 2.5%.
Reuters
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