Guinea halts Simandou iron ore project again

Spanish Market: Metals
06/07/22

Guinea's interim military government has again ordered work to stop on one of the most advanced iron ore projects in west Africa, increasing Australian and Brazilian dominance of the seaborne market into China and northeast Asia.

The government, which halted work for two weeks in March, believes that partners, Australian mining firm Rio Tinto and China's SMB-Winning, have missed a deadline to agree on a joint venture to develop a 650km railway and associated deepwater port. The delay is not in the best interest of the project, according to the Guinean government, which is now open to meeting alternate developers interested in accelerating the project.

Simandou is the most advanced of the major iron ore projects in west Africa, which would allow Chinese steel producers to reduce their reliance on seaborne ore from Australia and Brazil. Chinese firms including SMB-Winning are keen to develop the deposits to increase the geographical spread of iron ore sources, particularly as diplomatic relations between Beijing and Canberra remain tense.

Rio Tinto, which is the biggest iron ore shipper out of Western Australia, declined to comment on the situation in Guinea.

Rio Tinto owns 45.05pc of blocks 3 and 4 at Simandou, with Chinese aluminium producer Chinalco holding 39.95pc, and Guinea's government the remaining 15pc. SMB-Winning won a government tender for blocks 1 and 2 in late 2019, and plans to get the first ore shipment to market by 2025.

SMB-Winning is a consortium comprising Chinese aluminium producer Shandong Weiqiao, China's Yantai Port, transport and logistics company UMS International and Singapore's Winning Shipping.

Rio Tinto restarted work on the project 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.

Argus ICX iron ore was last assessed at $113.90/dry metric tonne (dmt) cfr Qingdao on a 62pc Fe basis on 5 July, down from $136.20/dmt on 13 June and $160.20/dmt on 7 March.

By Jo Clarke

Iron ore prices $/dmt

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