Rio Tinto Close to Reaching $20B Simandou Deal

Dow Jones reported that an agreement to unchain an investment worth tens of billions of dollars. This agreement carries extra significance as it is based in one of Africa’s poorest nations which could therefore have even greater ramifications. Anticipation has recently spiked with the agreement expected to be reached in just a few weeks’ time.

During a speech in Washington, Rio Tinto chief executive Sam Walsh recently reported that “he expects a long-awaited pact between Guinea and a consortium led by the Anglo-Australian mining company to be signed later this month. This has taken some time to bring to fruition, and I think this signing will inject the project with renewed momentum.”

Up through this point, the $US20 billion Simandou iron ore project has been suffering from a significant stall, failing to move forward due to financing. Along with its partners, Rio Tinto, Aluminum Corp of China, or Chalco, and the International Finance, the private sector arm of the World Bank – all partners in this project – have been deep in conversations with the Guinean government. Their talks have all encircled the best way to successfully finance and carry out the immense rail and port development which will be required to transport the mine’s production materials to the marketplace.

“The infrastructure that brings Guinea’s natural resource wealth to global markets can do so much more for the country,” commented Rio Tinto chief executive Sam Walsh. In this, he highlighted that upon achieving fully operational status, the Simandou iron ore project will be capable of contributing an estimated $US7.6 billion to the Guinean economy each year.

The large shadow this amount would cast on the current amount that the country receives in aid payments should help to provide some critical motivation for the Guinean government to facilitate the agreement currently on the table.