Rio Tinto approved USD 1.3 Billion for Simandou Iron Ore Project

Rio Tinto is accelerating the development of the Simandou iron ore project in Guinea with the approval of approx. USD 1.3 billion. (Picture: Rio Tinto / Anthony Bannister)

Rio Tinto has approved further USD 211 million study funding and USD 1.117 billion early commitments in next stage of the Simandou iron ore mining project in Guinea. The funding will allow the project to move forward towards first shipment of ore by mid-2015.

London, United Kingdom – Rio Tinto is accelerating the development of the Simandou iron ore project in Guinea with the approval of a further USD 211 million for continued studies and USD 1.117 billion of funding for commitments for early works and procurement of long-lead items. This funding will allow the project to move forward towards first shipment of ore by mid-2015.

Work is progressing on obtaining the required regulatory approvals with project partner Chalco, which, once granted, will trigger formation of the Joint Venture and the earn-in payment of USD 1.35 billion. Finalisation of the infrastructure investment framework, expected in early 2012, will also trigger the Government of Guinea’s requirement to contribute its share of infrastructure project expenditure incurred to that time.

The project is now gaining significant momentum, with construction works well underway. Work has already begun on the marine off-load facility near the preferred port site of Ile Kabak, 50 kilometres south east of Conakry, enabling the introduction of heavy equipment for construction. In-country support services such as air-charter, extensive camp works and associated infrastructure are also in progress, as is the commencement of earthworks for the extensive 650 kilometre rail corridor.

Today’s decision brings the total amount that has been spent or committed to the Simandou project to USD 3 billion, including the USD 700 million settlement payment. Of this amount, approximately USD 2 billion has been allocated to mine-related costs and USD 1 billion to infrastructure requirements.

The current interest in the Simandou project is held by Rio Tinto subsidiary Simfer whose shareholders are Rio Tinto (95 per cent) and the International Finance Corporation (IFC), a member of the World Bank Group (five per cent).

A new rail line through Guinea and a new Guinean port will be constructed to transport ore from mine to ship. The infrastructure will be jointly owned by the Government of Guinea and the other Simfer partners, with the Government able to hold a maximum stake of 51 per cent. Participants in the infrastructure joint venture will be required to fully fund their proportion of the infrastructure capital cost.

The new infrastructure joint venture will appoint Simfer as operator for the rail and port. The rail line will be available for passenger and freight trains and Simfer, as operator of the joint venture, may haul other mineral producers' ore subject to commercial agreement. Simfer will have the status of a foundation customer, and will therefore retain priority use of the infrastructure.