Simandou iron ore mine developers risk penalties

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Simandou iron ore mine developers risk penalties

Rio Tinto and a Chinese-backed consortium risk losing their mining licences if they fail to meet a tight construction timeline for the Simandou iron ore mine in Guinea.

Guinea’s government has grown increasingly impatient with the mining firms that control the giant Simandou deposit which has not been developed since Rio was first granted an exploration licence for it 25 years ago.

The ruling junta signed an agreement with Rio Tinto and Winning Consortium Simandou (WCS) under which the firms will collaborate on a 670-kilometre (416 mile) railway and a port to get Simandou’s high-grade ore to market.

Framework agreement

“The framework agreement gives Guinea a very precise calendar with significant penalties up to and including the withdrawal of the mining licence, for any mining company that does not respect its commitments. The worry for investors is that this ultimatum may incentivise the developers to cut corners,” said Eric Humphery-Smith, senior Africa analyst at Verisk Maplecroft.

According to Rio Tinto’s chief executive of copper, Bold Baatar, the framework sets out how the project will be built to international Environmental, Social, and Governance standards. Rio Tinto declined to provide details.

Rio Tinto owns a 45.05% stake in the southern half, Blocks 3 and 4, of Simandou, with Aluminium Corporation of China (Chinalco) holding 39.95% and Guinea’s government the remaining 15%. SMB-Winning – the consortium behind WCS – won a government tender in November 2019 for Blocks 1 and 2.

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