According to Mining.com Reuters, Guinea's interim president, Mamady Doumbouya, issued an ultimatum after meeting with Rio Tinto, Win Alliance and other companies, giving the companies 14 days to set up a joint venture to develop the Simandou iron ore mine. For now, Rio Tinto and winning alliances have not immediately responded to requests for comment.
It is reported that in March this year, Guinea's ruling military government signed a 35-year infrastructure agreement with Rio Tinto and Win Alliance. Under the agreement, the companies will cooperate to build a 670-kilometer railway and a port to export high-quality iron ore from Simandau. Guinea officially owns 15% of railways, 15% of ports and 15% of mining areas.
Dumbua said: "Little progress has been made since then [the March agreement]." This is a regrettable situation and, more importantly, unacceptable to the State".
It is clear that the Interim Government of Guinea has become increasingly impatient. Guinean authorities have also previously warned that if these companies do not strictly meet the development timelines of the West Mandu project, they will face the risk of losing their licenses.
As the world's largest and highest quality undeveloped iron ore mine, The Simandeau iron ore mine is the "cash cow" of the Guinean government and the main battlefield of multi-party competition. The project has not been developed since Rio Tinto first obtained a simandou exploration permit 25 years ago, partly because of the backwardness of local infrastructure and on the other hand, because of the game of various parties surrounding its development.
The first stage: Rio Tinto's inaction
In 1997, Simfer S.A., a subsidiary of the iron ore oligarch Rio Tinto, obtained prospecting licences for four blocks of the Simandeau iron ore with a total area of 1,488 square kilometers, and three years later withdrew 50 percent of the area, retaining 738 square kilometers of prospecting rights and extending them for two years.
In 2002, when the prospecting rights expired, Simfer still did not carry out substantive work and the license was extended for another two years, but no substantive work was carried out.
In 2006, Rio Tinto took over a 738-square-kilometer prospecting right in Simandau from Simfer and received a 25-year concession. But until 2008, Rio Tinto remained almost unchanged at the West Mandu Iron Mine.
Stage II: Disputes between the Great Powers
In the decade from 1997 to simfer's discovery of the Simandeau iron ore mine to 2008, Rio Tinto only drilled 6 holes in blocks 1 and 2, and Rio Tinto's "inaction" caused strong dissatisfaction from the Guinean government.
In 2008, the Guinean government took back mining rights in the northern section of West Mandu (Blocks 1 and 2 and the Zogata Iron Mine) and sold it to BSG Resources on the grounds of "not mining to the best of its ability". Later, Vale spent $2.5 billion to acquire a 51 percent stake in BSG Resources' North West Mandu block. Since then, Rio Tinto, Vale and BSG Resources have opened a tenure dispute over the northern section of West Mandu for more than a decade.
First, it was pointed out that BSG Resources had acquired mining rights in the northern section of West Mandu by bribing Guinean officials, and Rio Tinto had filed a lawsuit in the United States to confront Vale for stealing trade secrets and bribery.
In 2014, the Guinean government finally determined that the license rights to the northern section of West Mandu were obtained by BSG Resources through bribery, revoking Vale and BSG Resources' license rights in the northern section of West Mandu. Subsequently, BSG Resources countered that this was a false accusation, demanding that the license be restored and damages compensated.
Until 2019, under the mediation of the French president, BSG Resources abandoned the northern blocks 1 and 2 of the West Mandu project to retain the smaller Zogata iron mine in the north section of West Mandu, and the Guinean government also ended bribery allegations and legal proceedings against BSG Resources, thus ending the tenure dispute in the north section of West Mandu for more than a decade.
The northern block of West Mundo is settled, but the dispute between Vale and BSG Resources, which was once a joint venture between the north section of West Mundo, has only just begun. Since 2019, Vale has initiated a series of using a series of usable claims against BSG Resources for "fraud and breach of commitment" for a total of US$1.2 billion. BSG Resources also transferred the Zorgata Iron Ore to Niron Metals.
Compared with the disputes in the northern block, the ownership relationship in the southern block is relatively simple, and in 2011, Rio Tinto, which was unhappy with the Guinean government, paid the Guinean government $700 million to retain the mining rights of the two blocks in the southern section. Until now, control of the Southern Block has been vested in Rio Tinto.
The third stage: Chinese enterprises enter the market
As a project that can change the pattern of the global iron ore market, China naturally cannot surrender to others.
In July 2019, the Guinean government launched an international public tender for blocks 1 and 2 of the northern sector, and finally the "Win Alliance", jointly established by Singapore's Weili International, Yantai Port Group, Shandong Weiqiao Venture Group and Guinea's United Mining Supply Group, defeated another mining oligarch, FMG, with an investment commitment of US$14 billion, and won the mining rights of two blocks in the northern section of West Mandu.
As for the southern block, in 2010, Rio Tinto flattened the risk, found China Aluminum to take over the southern section of The West Mandu block, and formed a joint venture with Chinalco, with an investment structure of 50.35% of Chinalco and 44.65% of Rio Tinto. In November 2016, Rio Tinto and Chinalco signed a framework agreement for the transfer of the Simandow project, selling 45% of Rio Tinto's stake to Chinalco for US$1.1 billion to US$1.3 billion. However, negotiations did not go well, and in October 2018, Rio Tinto announced that the two sides had failed to reach a final agreement within the term of the agreement. At present, the equity situation in the southern section of West Mandu is 45.04% of Rio Tinto, 39.95% of the shares are owned by the Chinese consortium led by Chinalco and China Baowu, and the remaining 15% is owned by Guinean officials.
After several games in recent years, Chinese companies have spent tens of billions of dollars, which is not a big deal. Even if you get the Simandeau iron ore, you still need to invest huge amounts of money to build railways and ports, of which only the construction of railways will cost about 23 billion US dollars, but also face the decline in iron ore demand after the peak of domestic construction, vicious competition from international iron ore giants, fluctuations in iron ore prices, changes in the political environment of Guinea, etc., coupled with the fact that the Guinean government accounts for 15% of the dry stocks have a greater impact on corporate profitability, making the project have the characteristics of large investment, long cycle and many uncertainties.
The Simandow project has gone from a "big cake" that international mining giants are competing for to become a "hard bone" to bite.