JOHANNESBURG – Rio Tinto's Guinea unit has agreed terms with joint venture partners including China's Baowu on developing infrastructure for the huge Simandou iron-ore mine, the next step towards building a project in which it has held a stake since 1997.

Simandou lies in a remote corner of Guinea and the challenge of transporting high-grade iron ore from the mine to market has long hindered its development. Guinea's government requires any developer to build a 600-km railway to the coast.

Rio's Guinea unit formed a joint venture last July with Winning Consortium Simandou (WCS) and the Guinean government to develop that rail and port infrastructure.

A Rio spokesperson said they and Baowu Resources have now signed a non-binding term sheet as the next step towards achieving the shareholder agreement, cost estimates and regulatory approvals needed to push ahead with that.

The companies did not give any details of the terms of the agreement. Rio said the project partners committed through the term sheet to it meeting "internationally recognised ESG standards" and helping Guinea benefit economically.

Top Chinese steelmaker China Baowu Steel Group Co had said in a December 24 statement on its WeChat account that its subsidiary had entered into a term sheet for Simandou infrastructure.

China Baowu said it would speed up the negotiation of the shareholder agreement, lead the formation of the Bao Consortium and implement project financing, and accelerate the project's development.

The Bao Consortium plans to invest in WCS to hold 49% of WCS InfraCo and WCS MineCo, Baowu said, without saying how much it will spend on the stakes. It plans to increase its shareholding in WCS MineCo to 51% once the mine is operational.

"Baowu's entry to the project is a positive signal for the importance of Simandou and the long-term attractiveness of its high-grade, low-impurity iron ore," said Gerard Rheinberger, Rio Tinto's managing director for Simandou.

Simandou is the world's largest undeveloped project for iron-ore, a key ingredient in stainless steel.

Spokespersons for WCS and Guinea's mines ministry did not immediately respond to a request for comment.

WCS, a consortium of Singapore-based firm Winning International Group (45%), China Hongqiao subsidiary Weiqiao Aluminium (35%) and Guinean company United Mining Suppliers International (20%), won the rights to Simandou blocks 1 and 2 in November 2019.

Rio Tinto has held rights to Simandou blocks 3 and 4 since 1997 through Simfer S.A., which is owned by the government of Guinea (15%) and Simfer Jersey Limited (85%), itself a joint venture between Rio (53%) and Chalco Iron Ore Holdings (CIOH) (47%).

CIOH is held 75% by Aluminum Corporation of China (Chinalco) and 20% by Baowu, with China Rail Construction Corporation and China Harbour Engineering Company each holding 2.5%.