RIO Tinto expected to spend $6.2bn developing Guinea’s Simandou iron ore deposit with initial production pencilled in for 2025.
Speaking to Bloomberg News, Rio Tinto CEO Jakob Stausholm acknowledged the expense of Simandou – which is about a fifth of the group’s three year $30bn capex plan – but he added that the project’s iron ore was “of an exceptional quality, probably the highest quality on the planet”.
“It’s the ore of the future,” he said.
The mining giant’s partner in the project is its largest investor, Aluminum Corporation of China, known as Chinalco.
The project has been delayed for years partly owing to accusations and counter claims of bribery and wrongdoing. Another hurdle to its development has been the massive infrastructural spending required. As a result, analysts are wary of Rio’s aggressive timelines, said Bloomberg News.
“We have Simandou starting in 2027, so the time line is more aggressive than we had expected,” Bloomberg quoted JP Morgan analysts as writing in a research note.
The complexity of development and challenges around use of a shared rail line mean “we will need to gain more confidence on the project before modeling it on Rio’s indicated timeline,” the analysts said.
Rio, the world’s top iron ore exporter, needs to invest just to sustain its current level of production, but also expects urbanisation in India and across parts of Asia to drive additional growth, said Bloomberg News. Though Rio forecasts China — home to the world’s largest steel industry — will soon hit a peak in consumption, the producer expects global demand will rise almost a quarter by 2050.
“I’m optimistic,” Stausholm said of the Chinese economy. “The property market has its challenges, but then again, China is spending more again on infrastructure.” Other industries like electric vehicles are helping to add demand, he said.
Simandou is divided into four blocks, with blocks 1 and 2 controlled by the Winning Consortium Simandou, backed by Chinese and Singaporean companies, while Rio and Chinalco own blocks 3 and 4, said Bloomberg News.
New assessments of the Simfer concession’s size show it holds about 1.5 billion tons of reserves and a potential further resource of 1.4 billion tons, Rio said.
