Guinea’s government has approved
a multi-national group’s plan to build a railroad and deep-water port to
export output from the massive Simandou iron ore deposit to key markets
including China, the world’s top consumer of the commodity.
The consortium, which includes
Singapore’s Winning Shipping, Guinean mining logistics firm United
Mining Supply (UMS), Chinese aluminium producer Shandong Weiqiao and
Guinea’s government, won a tender last year to develop blocks 1 and 2 in
the northern area of Simandou.
Guinea said at the time the
consortium had committed to build a 650km railway and a deep-water port
and that it aimed to bring the two blocks into production by 2025.
Total cost of the project is now
pegged at $16 billion, up from the $14 billion originally estimated.
Allowing miners to ship ore via
closer ports in neighbouring Liberia would reduce that cost, but Guinean
authorities had repeatedly said they would only allow Simandou exports
to leave from a local port.
Battle for riches
At two billion tonnes of iron
ore with some of the highest grades in the industry, Simandou is one of
the world’s biggest and richest reserves of the steelmaking material,
but it has a controversial past.
In 2008, one of Guinea’s former
dictators stripped Rio Tinto’s rights over two of the four blocks the
deposit had been divided on and handed them to Israeli billionaire Beny
Steinmetz’s BSG Resources (BSGR).
Rio was able keep the two
southern blocks, but only after paying $700 million to the government in
2011. That guaranteed the miner tenure for the lifetime of the Simandou
mine.
That deal came under scrutiny in
2016, forcing the world’s no. 2 miner to fire two senior managers over a
questionable $10.5 million payment made to a consultant who helped the
company secure the two blocks and alerted authorities, including the US
Department of Justice and the UK’s Serious Fraud Office.
BSGR and Steinmetz were also
subject of several investigations over bribery and corruption
accusations, but that ended with the deal inked last year.
A London arbitral court later
ruled that BSGR had to pay $1.2 billion to Vale, its former partner in
Guinea, due to “fraud and breaches of warranty” in inducing the
Brazilian miner to enter the joint venture.
The tribunal based its decision
partly on the fact that the government revoked the concession in 2014
after finding that BSGR had obtained it by bribing officials.
Chinese presence
The northern blocks became
available part of a settlement between Guinea’s government and BSGR last
year.
As part of the agreement,
Steinmetz’s company agreed to walk away from the asset, but retained the
right to mine the smaller Zogota deposit. Niron Metals, an investment
vehicle co-founded and headed by the former Xstrata boss Mick Davis, is
planning to develop Zogota.
Rio Tinto holds a 45% stake in
blocks three and four of Simandou, and is currently mulling options to
move forward with it. State-controlled Chinalco owns 40% and the Guinea
government 15%.
China’s resource dependence on
Guinea has increased in recent years. In 2017, Beijing agreed to loan
President Condé’s administration $20 billion over almost 20 years in
exchange for bauxite concessions.
Analysts say Guinea’s population
has so far seen little benefit from Chinese investment.
Source: Cecilia Jamasmie |