Rio Tinto Inks $20-Billion Deal for Simandou Mine
Rio Tinto, Chinalco and the International Finance Corporation have agreed on a deal to develop Guinea’s iron-ore deposits, making it the biggest iron ore and infrastructure project in Africa
After years of delay, Rio Tinto has finally sealed the deal on the Simandou iron-ore development, agreeing to terms on Monday with the Guinea government. The $20-billion project will be the biggest iron ore and infrastructure mine in Africa.
Guinea signed the deal with Rio Tinto and its partners – China’s Chalco and the International Finance Corp. – setting conditions for substantial infrastructure investments into the project.
The conditions of the agreement include: a cross country 700km railway to Conakry, Guinea’s capital; a deep-water port at Morebaya with supporting infrastructures; and future port and railway expansion. The total cost is estimated to be around $20 billion to build, two-thirds of which are infrastructure costs.
The economic benefits of the deal, however, are great for Guinea. Once fully operational, the mine will contribute an estimated $7.6 billion to the Guinean economy each year.
"Today is an important milestone in the development of this world-class iron ore resource for the benefit of all shareholders and the people of Guinea," said Rio Tinto Chief Executive Sam Walsh.
The Simandou project has long been in the making. Rio acquired the rights for the land almost 15 years ago and has already spent more than $3 billion developing the southern part of Simandou. However, even with a contract in hand, exports from the mine aren’t expected any time soon. The deal requires the company to produce a feasibility study within a year, including financing within two-half-years, making production likely in 5-10 years.
Once the project is up and running at full production, the Simandou project is expected to export up to 95 million tons per year. At that volume, Rio would surpass Vale as the number one iron producer in the world.
The only obstacle now for Rio Tinto and its partners is locating investors.
Zimbabwe targets £8.8bn mining industry by 2023
Zimbabwe’s government plans to fast-track exploration, evaluation and digitalisation of selected reserved mining areas under the Ministry of Mines and Mining Development as part of wider measures to achieve a £8.8 billion mining industry by 2023, according to a senior government minister.
Information Minister Monica Mutsvangwa said other plans include stopping the issuance of special grants in the reserved areas under the Ministry of Mines and Mining Development until the exploration and evaluation is complete and a robust value addition program for diamonds is implemented.
Mutsvangwa was speaking at a post-cabinet media briefing on December 15.
She adds that the issuance and renewal of special grants for energy should also be based on the financial and technical capacity to value add all types of coal, as well as for ideal exploration of Coal Bed Methane.
For renewal of special grants, consideration should take into account the period the Special Grant has been held as well as plans with milestones for value addition of the special grant, Mutsvangwa says. She adds that the Zimbabwean government expects gold to drive the mining sector in order to achieve the ambitious target, with the precious metal expected to contribute approximately £2.96 billion to the overall target.
Mining is one of Zimbabwe’s major contributors to its economy, alongside agriculture, which is the mainstay. The mining sector accounted for more than 60 percent of the country’s foreign currency receipts in 2019, and contributed around 16 percent to national Gross Domestic Product, the Chamber of Mines says.
The country’s mining industry is focused on a diverse range of small to medium mining operations. The most important minerals produced in Zimbabwe include gold, asbestos, chromite, coal and base metals.
Zimbabwe expects its economy to expand by 7.4 percent in 2021 from a projected contraction of 4.5 percent this year, due to the effects of drought and the COVID-19 global pandemic.
When presenting the 2021 National Budget in November this year, Finance and Economic Development Minister, Professor Mthuli Ncube, said that the mining sector is projected to rebound by 11 percent next year after surviving a COVID-19 induced shock that saw the sector contract by 4.7 percent in 2020. In September, mining bans in national parks were introduced, according to news agencies.
He added that the National Budget would allocate £1 billion towards the operations of the ministry for planning, promotion and exploration, data capturing, and automation, among other key mining processes.
Other factors necessary for the achievement of the £8.8 billion target include a stable macroeconomic environment, policy consistency, and availability of long-term capital to fund mining projects along the entire mineral value chain, the minister said.
Stopping "illicit financial flows" from gold smuggling is another key issue to address, according to media reports.