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Guinea’s ruling junta has ordered a full halt of Rio Tinto’s (ASX, LON, NYSE: RIO) vast Simandou iron ore project in the country’s southeast, with interim president Mamady Doumbouya saying it is not clear how the mine will preserve national interests.
The current government, who took power in a military coup in September, said in a statement that Doumbouya had not seen any progress in that direction, despite having discussed the matter with Rio’s boss Jakob Stausholm in December.
“[Colonel Doumbouya] therefore ordered the cessation of all activity on the ground pending the answers to questions posed to various actors and the clarification of the operational mode by which the interests of Guinea will be preserved,” government spokesperson Ousmane Gaoual Diallo said in the statement.
Simandou, owned by Rio Tinto and a Chinese-backed consortium, spent years in limbo because of disputes over ownership rights and the complexity and expense of transporting ore to the coast.
Rio Tinto said on Friday it was not making any public comment on Guinea’s move at this stage. The world’s second largest miner owns about 45% of Blocks 3 and 4 of Simandou, while Aluminum Corp. of China (NYSE: ACH) holds 40% and Guinea’s government the remaining 15%. Blocks 1 and 2 are controlled by China-backed SMB Winning Consortium.
“It’s a bold move by Doumbouya, and it may yet come back to bite him,” Eric Humphery-Smith, Senior Africa Analyst at risk intelligence company Verisk Maplecroft, said in a note. “This is the culmination of several months of rumblings that now have risen to the surface and boiled over.”
“Caviar of iron ore”
At two billion tonnes in iron ore reserves and some of the highest grades in the industry (66% – 68% Fe, which attracts premium pricing), Simandou is one of the most easily exploitable iron ore deposits outside of Australia’s Pilbara region and Brazil’s.
At full production, the mine is expected to export up to 100 million tonnes per year. Simandou would by itself be the world’s fifth-largest producer behind Fortescue Metals (ASX: FMG, Vale (NYSE: VALE) and BHP (ASX: BHP).
Guinea has said any developer of the mine must build a railway spanning the country, even though it adds significant costs and the route to port through neighbouring Liberia is much shorter.
SMB Winning Consortium had already started work on a 650-km (404 miles) railway linking Simandou to the port.
According to Humphery-Smith, Guinea’s decision to suspend all activities at Simandou reflects mostly the “power struggle” between the SMB consortium and Guinean authorities regarding recommendations they made in December in relation to the rail and port infrastructure.
“These developers are used to getting their way as the Guinean government has historically not offered much resistance (…) We don’t expect this to drag on much longer than a couple of months,” he wrote. (mining.com)
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