Simandou build expected to start in 2024 after almost 30 years of setbacks

Rio Tinto (LSE: RIO; ASX: RIO) expects to start building the US$20 billion ($26.7 billion) Simandou iron ore project in Guinea this year, following almost three decades of setbacks and scandals.

Set to be the world’s largest and highest grade new iron ore mine, the project will add around 5% to global seaborne supply when it comes on line. Simandou is a partnership between Rio Tinto, the Guinean government and at least seven other companies, including five from China.

Rio Tinto first secured an exploration licence for Simandou in 1997. Since then, the country has experienced two military coups, seen four heads of state, and undergone three presidential elections.

In 2024, once the miner’s state-owned Chinese partners receive the final approval from Beijing, Rio Tinto intends to commence its most complex project in history.

“There is nothing else out there of this scale and size,” Rio Tinto’s head of the copper business, Bold Baatar, told the Financial Times in an interview. He had previously called the project the “Rolls Royce of iron ore.” 

Rio Tinto plans to build one iron ore mine at the Simfer project in partnership with a consortium led by Chinalco, of which Rio Tinto owns two of four Simandou mining blocks. Rio Tinto holds a 53% stake in the joint venture, while Chinalco holds the rest. A second mine, the WCS project, will be built by Baowu in partnership with a consortium led by the Singapore-based Winning International Group.

The parties are also expected to co-finance the construction of a 552-km long railway.

Baatar told Financial Times that Simandou has the potential to help decarbonize the Chinese steel industry.

“A part of the ore body that we’re looking at is very suitable, we think, for direct reduction iron,” Baatar said.

“The only way the steelmaking industry globally decarbonizes is if China decarbonizes.”

First production from the two blocks co-owned by Rio Tinto is expected to ramp up over 30 months from 2025 to an annualized capacity of 60 million tonnes per year.

The company said its share of the production will be 27 million tonnes.

(With files from Reuters)