Australian iron ore firms look to west Africa

Market: Metals
24/08/22

West Australian (WA) producer Fortescue is joining its rival Rio Tinto in looking to develop major iron ore projects in west Africa, as both navigate the troubled Canberra-Beijing relationship.

China has been keen to establish an iron ore business in west Africa to reduce its reliance on the Australian steel-producing feedstock. Beijing has used trade to punish Canberra for diplomatic and political slights. It has banned Australian imports of coal since 2019 because of diplomatic and trade tensions. But it has been unable to ban imports of Australia's most lucrative export, iron ore, because of insufficient alternate supplies.

Beijing's disagreement with Canberra does not stop close corporate ties between Australian firms, like Rio Tinto and Fortescue, and Chinese entities. The big WA iron ore producers have expertise in developing the large-scale mining and logistics projects required to underpin a major iron ore business in west Africa.

Fortescue plans to invest $90mn exploring for iron ore in Gabon after it signed an initial agreement with the government. The high-grade hematite available in Gabon would complement Fortescue's lower grade hematite and magnetite capacity in WA. But it will have to navigate the political and economic hurdles within Gabon and across the wider west African region.

Guinea's interim military government last month again ordered work to stop on Simandou, one of the most advanced iron ore projects in the region, for the second time within a few months before relenting once it was satisfied on project progress.

Rio Tinto, in a joint venture with Chinese firm SMB-Winning, restarted work on Simandou in August 2020 four years after it wrote $1.8bn off the value of the project. Other west African iron ore projects are also struggling to progress to production, with the Mbalam project on the Cameroon-Congo (Brazzaville) border entangled in court cases surrounding a change of ownership.

Simandou could deliver 150mn t/yr of fines and lump with an average grade of 65pc Fe, which would attract a significant premium to the 60-62pc Fe shipped from Australia's Pilbara, offering a partial alternative to the more than 600mn t/yr of iron ore that China imports from Australia.

By Jo Clarke

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