- Title: GUINEA: Guinea hopes for first iron ore from Simandou mine in 2018
- Date: 29th May 2014
- Summary: CONAKRY, GUINEA (MAY 28, 2014) (REUTERS) (SOUNDBITE) (French) MINING ANALYST, MADANI DIA SAYING: "If there are changes in the market, meaning if the demand for iron decreases as is the case now with the demand from China, then in that case Rio Tinto has no interest in bringing new production of iron ore on the world market because it will affect the price of iron ore, whi
- Embargoed: 13th June 2014 13:00
- Keywords:
- Location: Guinea
- Country: Guinea
- Topics: Business,Economy,Politics
- Reuters ID: LVADN6IN05LYDDVGTWAN13TYH9EN
- Story Text: Guinea signed a deal with Rio Tinto, Chinalco and the International Finance Corporation this week setting out conditions for massive infrastructure investment to revive the giant 20 billion US dollar Simandou iron ore project.
Rio, which holds a 46 percent stake in Simandou, said this month that production from Simandou would start in 2018 at best, with a bankable feasibility study due by early 2015.
The government hopes the project will not only provide competitive iron ore for 40 years - potentially doubling the size of Guinea's economy - but the infrastructure will open up the interior of the rugged, heavily forested country.
"This is a great opportunity for Guinea because according to the investment that is being made, we could estimate that it will bring between 20 and 30 billion USD of foreign direct investment into the country. This is an extraordinary windfall, now the only problem is whether Guinea has the capacity to absorb this windfall... to benefit primarily the Guinean enterprises," said mining analysts, Madani Dia.
Simandou South - the largest iron ore and infrastructure project in Africa - has been delayed by political volatility in Guinea and uncertainties over its investment framework, after President Alpha Conde's government suggested it wanted to retain a majority stake in the infrastructure consortium.
To export the high-grade ore from Simandou South to Guinea's Atlantic coast, the project requires the construction of a 650-km railway through the West African jungle, at an estimated cost of at least 7 billion US dollars.
Dia said however, that Guinea should be weary of global demand for the raw material of which China is the world's biggest importer, which fell to its lowest level since September 2012 and looks poised for further losses amid a deepening glut that could start pushing high-cost producers out of the market.
"If there are changes in the market, meaning if the demand for iron decreases as is the case now with the demand from China, then in that case Rio Tinto has no interest in bringing new production of iron ore on the world market because it will affect the price of iron ore, which will drop. It will therefore also affect its revenues and increase price of doing business. So if the market doesn't corporate, Rio Tinto will have to freeze its production in Guinea," he said.
Officials say 300 million US dollars had been mobilised for feasibility studies which would allow the project to get underway.
Meanwhile, Guinea, with one of Africa's richest natural endowments of iron ore, gold, bauxite and diamonds, remains shockingly poor, its treasures still mostly buried.
Guineans are waiting to see if this landmark deal will benefit them and survive a culture of corruption.
"It is not just about signing an agreement, it 's about applying what was agreed in the document. If the Guinean government and its partners fight to apply what is agreed, then it will be a good thing. However, we should wait for the National Assumably to ratify the document. I am sure that we have people at the national assembly who will be able to determine if the agreement is good for the country and ratify it," said Lansana Duono, an accountant in Conakry.
The conclusion of the agreement was a welcome piece of good news for Guinea, which has been locked in a dispute with BSGR, the mining arm branch of Israeli billionaire Beny Steinmetz's conglomerate, over the northern side of Simandou.
Guinea last month decided to strip BSGR and its partner Brazilian miner Vale of its rights to the northern part of Simandou, accusing BSGR of obtaining the concession corruptly in 2008 during the twilight of the presidency of Lansana Conte. BSGR strongly denies this.
The minister said Guinea would launch a bidding process for companies to purchase the right to exploit these blocs. - Copyright Holder: REUTERS
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