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The world’s biggest mining project, a $20 billion iron ore, rail and port development in a remote part of West Africa, will begin this year after a 27-year wait beset by setbacks, scandals and several false dawns. It is planned.
UK-listed Rio Tinto first secured an exploration license in 1997 in the Simandou Mountains in south-eastern Guinea, 550 kilometers from the coastal capital. Since then, the country of 13 million has seen two coups and four heads of state and three heads of state. presidential election.
During that time, Rio Tinto has had six chief executives, been stripped of half its licenses, waged long legal battles with several rivals, settled corruption allegations with U.S. authorities, and even relinquished its projects. The company sought to completely withdraw from the company, but the sale ended in failure. .
Finally, in 2024, once Rio Tinto’s state-owned Chinese partner receives final approval from the Chinese government, the British-Australian mining company plans to fire the firing gun on its most complex project in its history.
“There’s nothing else of this size and scope,” Rio Tinto’s Bold Baatar said in a recent interview with the Financial Times.
Mr Baatar is officially head of the copper business, but for the past seven years he has served as the executive responsible for securing the project’s complex commercial contracts.
Too expensive for a miner to develop alone, the project is now a partnership with at least seven other companies, including Rio Tinto, the Guinean government and five Chinese companies.
Rio Tinto will partner with a consortium led by Chinalco, the world’s largest aluminum producer, to build one iron ore mine, known as the Simfer project.
The second mine, known as the WCS project, will be built by Baowu, the world’s largest steel producer, in partnership with a consortium led by Singapore-based Winning International Group.
At the same time, the two parties will co-finance the construction of a 552-kilometre railway that curves through Guinea’s mountainous interior to the sea and the development of a deep-water port on the Atlantic coast.
The Rio Tinto and Chinalco consortium will also need to fund an additional 70km of rail spur line to connect the mine to the main line. Rio Tinto’s share of the total cost is expected to be his $6.2 billion, more than the company’s entire annual capital spending over the past five years.
For Baatar, Simandou’s complex partnership structure provides a template for the “new era of joint development” needed to source the bulk metals needed to build the green economy of the future.
150 years of industrial mining means that nearly all of the simple, easily accessible ore bodies have been developed, leaving behind complex projects that require ingenuity and large amounts of capital.
“Historically, if you look at the mining industry, each mine had its own infrastructure,” Baatar says. In Simandou, “the capital numbers are very large for any political party,” he added.
Seven years ago, after a series of problems, Rio Tinto sought to exit the project and agreed to sell its stake to Chinalco for up to $1.3 billion. In the end, the Chinese government, which must approve foreign investment and sales by state-owned enterprises, did not approve the deal, and the project remained on Rio Tinto’s books.
The difference between 2016 and now is that Simandou’s high-grade ore has become even more attractive given the need to decarbonize steelmaking, Baatar said.
“The fundamental change in recent years is that there is much more global agreement on climate change,” he said.
The iron-making process, which typically uses coke to make iron from ore in a blast furnace and turn it into steel, is highly carbon-intensive and produces about 8 percent of the world’s carbon emissions.
To reduce emissions, the industry is exploring alternative approaches such as direct reduced iron technology, which uses hydrogen and carbon monoxide to process ore rather than coke. Such processes require high-grade iron ore, which is becoming increasingly difficult to find in large quantities.
The ore that Rio Tinto plans to mine from Simandou has an average iron content of more than 65 percent, the highest in the world. Baatar calls this “iron ore caviar.”
Baatar said Simandu has the potential to contribute to the decarbonization of China’s steel industry.
“We believe that some of the ore bodies we are studying are very suitable for direct reduced iron,” he added. “The only way for the steel industry to decarbonize globally is for China to decarbonize.”
According to the World Steel Association, China will produce 1 billion tons of steel in 2022, accounting for more than half of global production. India, the second largest producer, produced 154 million tons of her.
Foundation work has already begun along the railway line, and Rio Tinto plans to begin construction of the mine if the Chinese government approves Chinalco’s investment. The first ore is expected to be shipped in 2025, increasing to full production of 60 million tonnes per year by 2028, accounting for approximately 5% of the global offshore iron ore market.
To complicate matters further, Guinea has been under military rule since the junta led by Colonel Mamadi Doumbouya ousted him in a coup after incumbent Alpha Condé amended the constitution to seek a third term starting in 2021.
Baatar was unfazed by politics. “We have been operating in Guinea for over 15 years, through different governments and different forms of government. The organization has a strong memory and a strong legacy of commitment to honoring the contracts set.”
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