After almost three decades of false starts, the massive Simandou iron ore mine in Guinea is on track to deliver a significant breakthrough this year to its Chinese investors and British-Australian mining giant Rio Tinto.
US-based rail manufacturer Wabtec has secured deals worth US$525 million to supply the locomotives that will deliver the first shipments from the Simandou mountain range in the remote forests of southeastern Guinea to the ports.
Simandou, the world’s largest known undeveloped reserve of high-grade iron ore, is strategically important to China, which aims to diversify its suppliers from Australia and Brazil, that together account for about 80 per cent of seaborne exports.
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Wabtec said it had won a US$248 million deal to supply locomotives to Winning Consortium Simandou (WCS), which is developing blocks 1 and 2 of the concession, covering an estimated 1.8 billion tonnes of reserves with an iron content of more than 65.5 per cent.
WCS shareholders include Winning International Group of Singapore, China Shandong Weiqiao Group and the state-owned China Baowu Steel Group.
Baowu, China’s largest steelmaker, has interests in the southern and northern parts of Simandou. In June last year, Baowu Resources completed the acquisition of a 49 per cent share of WCS mine and infrastructure projects.
Simandou’s remaining blocks 3 and 4 are owned by Rio Tinto as part of its Simfer joint venture with the Chinese firm Chalco Iron Ore Holdings and the Guinean government.
First production from the Simfer mine is expected in 2025, ramping up over 30 months to an annualised capacity of 60 million tonnes per year, according to Rio Tinto. Wabtec agreed a few months ago to supply Simfer with a US$277 million locomotive fleet.
After almost three decades of false starts, Guinea’s massive Simandou iron ore mine is on track to deliver its first shipment this year. Photo: Rio Tinto Simfer alt=After almost three decades of false starts, Guinea’s massive Simandou iron ore mine is on track to deliver its first shipment this year. Photo: Rio Tinto Simfer>
Announcing the latest agreement in January, Mpilo Dlamini, Wabtec’s regional vice-president of sub-Saharan Africa, said that Simandou “represents a transformational economic opportunity for Guinea”.
“We are also committed to the development of Guinea by fostering local employment, developing indigenous talent, and empowering local businesses to support the operation and maintenance of this vital rail network,” he said.
Zhang Cheng, chief executive of WCS, said the locomotive order was “another important milestone for the Simandou project”.
“As work continues to build the TransGuineen railway, we will have the equipment resources in place that support the high international standards that we’ve committed to deliver,” he said.
Wabtec said deliveries of its locomotives will begin later this year. The railway connecting the Simandou mine and the port of Morebaya 600km (373 miles) away is expected to be completed and running by the end of 2025.
At an estimated US$20 billion, the development of the mine and its associated infrastructure is the largest greenfield investment of its kind in Africa.
“Simandou will bring about 120 million tonnes of iron ore to the market, positioning Guinea as the third largest iron ore exporters around the globe,” said Liz Gao, senior analyst in iron ore at commodities consultancy CRU Group, in an interview with the Post.
According to Gao, when Simandou becomes operational, it will probably replace some Brazilian and Australian iron ore shipments to China, although they will still maintain a dominant position.
Lauren Johnston, a China-Africa specialist and associate professor at the University of Sydney’s China Studies Centre, said the investments in Africa point to China’s determination to de-risk its iron ore supplies.
In particular, China wants to de-risk away from Australia, which for some time has been the country’s dominant supplier of iron ore, according to Johnston.
With Chinese companies holding higher combined stakes from the two mining concessions at Simandou, most of the iron ore it produces could be exported to China – the world’s largest consumer of the resource and biggest steel producer.
Simfer is developing blocks 3 and 4 of the Simandou project into a 60 million tonne per year operation, with WCS planning to ship a similar quantity of iron ore from its facility, according to Rio Tinto.
Simfer is building a 70km (43.5-mile) spur rail line and a 60 million tonne per year transshipment vessel port. WCS will construct the dual track main rail line, a 16km (10-mile) spur rail line and a 60 million tonne per year barge port.
Once complete, all co-developed infrastructure and rolling stock will be transferred to and operated by the Compagnie du Transguineen (CTG) joint venture, in which Simfer and WCS each hold a 42.5 per cent equity stake.
Ownership of the rail and port infrastructure will transfer from CTG to the Guinean state after 35 years of operation.
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