Guinea hails agreement on Simandou iron ore as former owners duke it out in court

The Simandou iron ore project

GUINEA hailed an agreement with a consortium developing its Simandou iron ore reserve which was signed on Tuesday, saying it was “an important step” in the development of the country’s mining sector.

The consortium – which includes Société Minière de Boké (SMB) and Singapore’s Winning Shipping as well as Guinean government interests – won a $14bn tender last November to develop the blocks at Simandou, the largest known deposit of its kind holding more than two billion tons of high-grade ore, said Reuters.

The deal includes the construction of a 650km railway from Guinea’s mountainous forest region to the coast, and a deep sea water port, which will unlock the development of blocks 1 and 2 of the rich Simandou iron reserve estimated to have a 25-year life of mine. It is expected to be minerals-rich Guinea’s largest industrial mining project to date.

“This is an important step in the development of the Guinean mining sector,” Reuters quoted Guinea mines minister Abdoulaye Magassouba as having said. Simandou would help diversify the country’s mining output which until now heavily depended on aluminium ore and gold, said Reuters.

The consortium edged out Australia’s Fortesque Metals Group which had bid $9bn, but didn’t formally promise to build the railway dubbed the ‘Transguinéen’. Transguinéen was pivotal in the decision to grant the blocks to SMB-Winning, Magassouba told Reuters at the time the award last year.

In the background, a long-standing legal row between BSG Resources’ Beny Steinmetz and Vale, which previously had the rights to develop Simandou is threatening to bubble over.

Steinmetz said in May he was hopeful new evidence would show Vale knew the risk of developing Simandou – a turn of events that would help him reverse a $2bn arbitration award granted to the Brazilian miner.

The Financial Times reported that Vale’s dispute with Steinmetz dated back to 2010, when it agreed to buy a 51% stake in Guinea assets belonging to BSG Resources, the mining company controlled by the Steinmetz family, including two blocks of Simandou.

The joint venture lost the development rights following accusations of bribery – a claim that Steinmetz refutes. But having lost the rights, Vale launched legal action and last year was awarded $2bn by a London arbitration court. “Vale were aware of the rumours but they closed their eyes, ears and nose to get the deal done,” Steinmetz told the Financial Times.