Rio Tinto turns spotlight on long ignored Simandou as investment case for iron ore grows

The Simandou iron ore project

RIO Tinto CEO, Jean-Sebastien Jacques, reiterated his group’s interest in seeing how it could participate in the development of Simandou, an iron ore deposit which has been the subject of legal action for years, preventing its development.

“Under all scenarios Simandou will be developed, with or without Rio Tinto,” said Jacques in an interview with Bloomberg News. “There is a huge incentive for the Chinese to make it happen now,” he said referring to growing demand for the steel-making ingredient.

Simandou, which is located in West Africa’s Guinea, is divided into four blocks. Blocks 1 and 2 are controlled by a consortium backed by Chinese and Singaporean companies, while Rio Tinto and Aluminum Corporation of China, known as Chinalco, own blocks 3 and 4.

The renewed interest from China, as well as new owners for the half not controlled by Rio, means the company will consider options including joint development of the sites or their infrastructure, said Bloomberg News.

“We will look at all options because it is an infrastructure project and scale is important,” Jacques said. “I think it’s important for people to understand what would be the benefits of putting together 1, 2, 3 and 4.”

The legal complexity in which Simandou was caught related largely to claims against Beny Steinmetz’s BSR Resources that it had taken bribes in order to win rights to Simandou. The matter resulted in court conflicts that are not entirely settled today.

Bloomberg said that even with most of the legal disputes out of the way, Rio Tinto must decide whether it’s prepared to spend the large amounts needed to extract and transport the super-rich ore from its part of the project.

New studies with Rio’s Chinese partners are aimed at cutting the capital intensity, operating costs and development timetable, with some fieldwork to start this half, the London-based miner said Wednesday in an earnings statement.

Half-year earnings published on Wednesday showed iron ore dominated Rio Tinto’s profits.