Simandou iron ore project resumes operations after one-year suspension
Published: Mar 20, 2023 11:10 PM
Iron ore Photo:VCG

Iron ore Photo:VCG

A ceremony for the resumption of the Simandou mining project, the world's largest undeveloped iron ore deposit, took place on Saturday, the Guinean government announced on Sunday, meaning the project has officially entered into substantive development after a one-year suspension.

Now, several groups are expected to operate the project, according to media reports. The operators plan to open the railway and transport ore in 2025, according to the current schedule, a Caixin report said on Sunday.

Industry analysts said the resumption sets a positive tone. Several Chinese companies will facilitate the progress of the project while strengthening the domestic steel industry's bargaining power in the international market.

The profits of Chinese steel firms will be better secured in the volatile global iron ore market, experts said.

The Simandou project has the world's largest reserve of quality ore, with an estimated annual output of 120 million tons at the initial stage.

Mining was put on hold for various reasons, including infrastructure issues and the distribution of interest among all parties.

The project's development requires accompanying basic infrastructure, including a 600-kilometer-long railway that stretches east-west across Guinea, as well as a port on the country's western coast.

In March 2022, Guinean government halted all activity, saying that it was seeking to clarify how the country's interests would be preserved.

The resumption of the project came just over a week after a shareholder agreement of infrastructure company La Compagnie du Transguinéen (CTG) was signed by investors and the Guinean government.

CTG is the future owner and operator of the Trans-Guinea railway and port infrastructure, and the agreement clarified the company's corporate governance structure and operating model.

CTG was established in July 2022 by the Guinean government, Winning Consortium Simandou, which is a consortium backed by Singaporean and Chinese companies, and Simfer - with Aluminum Corp of China and Rio Tinto Group being the joint shareholders.

As an important potential investor, China Baowu Group participated in the negotiation and signing of the agreement.

Wang Guoqing, a research director at Beijing Lange Steel Information Research Center, told the Global Times on Monday that these developments show that the project is about to resume, which is good for the outlook of Chinese participating companies and the steel industry overall.

Chinese companies that have equity in the project can get profits in the form of dividends. The joint ownership of the project also offers more bargaining power for China's steel industry.

In 2022, China imported 1.11 billion tons of iron ore, 1.5 percent less than the previous year. Iron ore's foreign dependence stayed at 74.1 percent, which was consistent with 2021.

Brazil and Australia are the two major suppliers, taking more than 80 percent of the total iron ore imports.

Global Times