Name and Location
Simandou iron-ore project, Guinea.
Client
Rio Tinto and Chalco, a subsidiary of State-owned Aluminium Corporation, of China, hold a 50.35% and 44.65% interest respectively in the project. The remaining five per cent is held by the International Finance Corporation.
Guinea retains its options for participation in the project and is expected to take up its first share in the near future.
Net Present Value/Internal Rate of Return
Not stated.
Project Description
The Simandou project comprises three core elements – a mine, a railway and a port – as well as associated infrastructure.
There will be an openpit iron-ore operation in the Simandou range, in south-eastern Guinea, with an expected peak production of between 95-million and 100-million tonnes a year.
The railway will be about 650 km long to transport the iron-ore from the mine to the Guinean coast.
The port will be located south of Conakry, in the Morebaya river.
Associated developments to provide utilities and supporting infrastructure for the project include construction facilities, access to materials, power generation, water, access roads and accommodation.
Construction of the project will be undertaken in two stages.
The first stage will develop the southern Ouelaba mine site, which will include the construction of the railway and port to a capacity of about 50-million tonnes a year.
The second stage will bring the northern Pic de Fon mine site on line and expand the capacity of rail and port facilities, increasing production to between 95-million and 100-million tonnes a year.
The mine will be the largest integrated mine-and-infrastructure project ever developed in Africa.
Value
A Rio Tinto engineering study conducted on the project estimates capital expenditure at $18.3-billion.
Duration
The first shipment of ore was initially expected by 2015; however, this has been postponed to 2018.
Latest Developments
Rio Tinto will seek financing for its massive Simandou project, despite writing down its value, owing to low commodity prices and funding uncertainties.
The world's second-biggest miner reported a net loss of $866-million last year, partially because of a $1.1-billion writedown of the Simandou project.
However, Rio Tinto, investors and advisers have said that this will not impede the hunt for funding or the timing of the project, which could have a major impact on Guinea's flagging economy.
Guinean President Alpha Conde is relying on the project to boost the country’s finances.
Everything now depends on funding for the project, whose economics are less certain now that commodity prices are in a trough. Iron-ore prices are near multiyear lows, impacted on by waning demand in China and a market glut.
Rio has said it will present a feasibility study in May, outlining the cost of the project, after which investors will make a decision. Until then, the timing of the venture is unclear.
Key Contracts and Suppliers
Fluor (construction contractor) and NRW Holdings (earthworks contract).
On Budget and on Time?
Too early to state.
Contact Details for Project Information
Chinalco, tel +86 10 8229 8103, fax +86 10 8229 8081 or email info@chinalco.com.cn.
Rio Tinto, Mark Shannon, tel +44 20 7781 1178, fax +44 20 7781 1832 or email mark.shannon@riotinto.com.
Fluor, tel +1 469 398 7000 or fax +1 469 398 7255.
NRW Holdings, tel + 61 8 9358 5510 or fax +61 8 9358 5515.