No. 2 miner Rio Tinto and Chinese aluminum giant Chinalco have agreed with Guinea to develop a $20 billion infrastructure project to revive its massive Simandou project by 2020. No start date has been announced, but feasibility studies are pending for Q2 2015; the project requires an extra $7 billion 650-km railway with a $4 billion deep-water port.
Rio estimates the iron-ore mine, one of the world’s largest, can produce 100 million tons per year (t/y). Together with the port and rail project, Simandou could double the West African nation’s GDP while adding 45,000 local jobs, according to company officials. The International Finance Corp. (IFC), the lending wing of the World Bank, is also a signatory.
Land disagreements, however, could delay production, said analysts of the accord, which covers two of four mining permits in Guinea’s southeast. “Mining has the potential to be a game-changer for Guinea,” President Alpha Conde said, as quoted by Bloomberg. “This represents our continent’s efforts to meet infrastructure challenges.”
The government will gain a 7.5% interest in the project upon parliamentary ratification. The deal further allocates a 3.5% royalty to Conakry for exports, while port and rail assets will be surrendered to the government by 2045; once approved, the partners will complete a financing study and development timeline.
Last month, Guinea revoked rights to 50% of the project held by a venture of Vale and Barry Steinmetz’s BSG Resources Ltd., alleging corruption. Prior to 2008, however, Rio Tinto held rights to all four blocks. Rio Tinto previously sought to begin production by 2018 and owns 46.6% of the resource; Chinalco owns 41.3%, Guinea 7.5% and the IFC has 4.6%.