Rio Tinto has announced the fulfilment of all conditions necessary for the development of the Simandou iron ore project in Guinea.
This includes the receipt of approvals from Guinean and Chinese regulatory bodies, paving the way for the project’s advancement.
The company noted that the transaction is set to be finalised in the week commencing 15 July 2024.
Simandou’s mining concession is segmented into four blocks, with Rio Tinto holding rights to blocks three and four through the Rio Tinto Simfer joint venture (JV), which includes Rio Tinto, Chalco Iron Ore Holdings (CIOH) and the Government of the Republic of Guinea.
Rio Tinto is Rio Tinto Simfer’s majority shareholder as well as managing partner.
Following the recent Simfer Board endorsement, Simfer is now positioned to invest in and finance its share of the rail and port infrastructure, which is being developed in collaboration with Winning Consortium Simandou (WCS), Baowu and the Republic of Guinea.
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By GlobalData
The project entails constructing more than 600km of a new multi-use trans-Guinean railway and port facilities, enabling the export of up to 120 million tonnes of iron ore annually by Simfer and WCS from their respective concessions.
This initiative represents the most significant greenfield integrated mine and infrastructure investment in Africa.
Under the agreed terms, Simfer will acquire a stake in the WCS project companies constructing the infrastructure, commit to performing a part of the construction works and fund its share of the co-developed infrastructure cost, totalling nearly $6.5bn, with Rio Tinto’s share being around $3.5bn (£2.7bn).
CIOH has fulfilled its capital expenditure obligations required by Simfer for critical works up to completion.
A first payment of around $410m for expenses until the end of 2023 was made on 28 June 2024, and a second payment of approximately $575m for 2024 expenses was made on 11 July 2024, settling all expenditures incurred to date.
Simfer and WCS will share the infrastructure capacity and associated costs equally.
Simfer is set to develop, own and operate a 60 million tonnes per annum (mtpa) mine in blocks three and four, while WCS is developing blocks one and two.
Each will deliver separate infrastructure scopes to leverage their expertise.
Simfer will construct a 70km spur rail line and a 60mtpa transhipment vessel port, whereas WCS will build the main dual track 536km rail line, a 16km spur rail line and a 60mtpa barge port.
Once completed, all co-developed infrastructure and rolling stock will be transferred to and operated by the Compagnie du Transguinéen JV, with Simfer and WCS each holding a 42.5% stake and the Guinean State holding a 15% interest.
First production from the Simfer mine is expected in 2025, with a ramp-up over 30 months to an annualised capacity of 60mtpa (27mt Rio Tinto share).
The mine will initially produce a single fines product before transitioning to a dual fines product suitable for blast furnace and direct reduction.
Simfer’s total capital funding requirement for the Simandou project is estimated at approximately $11.6bn (R210.82bn), with Rio Tinto’s share being about $6.2bn.
From 1 January 2024, Rio Tinto’s expected remaining capital investment is $5.7bn.
In April this year, Simandou iron ore project shareholders signed financing agreements totalling $15bn.
