The decline of Denel would compromise South Africa’s strategic independence, says chief restructuring officer (CRO) Riaz Saloojee, making the ... timely disbursal of the R3.4bn ($196m) lifeline thrown to the entity critical.
Interim President Mamady Doumbouya announced the order following a cabinet meeting last Thursday when, according to a statement, he expressed frustration over the lack of progress in the development of the mine:
“The President of the Transition recalled that he had requested the implementation of the exploitation of the Simandou deposit taking into account the interests of Guinea. Unfortunately, to date, despite his request, which dates from December 2021, there has been no progress. He, therefore, instructed the cessation of all activity on the ground pending the answers to the questions posed to the various actors and the clarification of the modus operandi in which the interests of Guinea will be preserved.”
Specifically, the president is upset that the Australian and Chinese owners that own the bulk of Simandou’s four mining blocks are not working more closely together to build the costly railway infrastructure that’s crucial to get the ore from the mine to the port.
Two of the blocks are fully owned by the China-backed Winning Consortium Simandou (WCS). The other two are jointly controlled by Australian mining giant Rio Tinto (45%) and the Aluminum Corp. of China, Chinalco (40%).
Last year, Reuters reported that WCS had begun construction of a railway from its two blocks but clearly construction has not moved fast enough to satisfy the host government. It also didn’t seem to happen in concert with the Sino-Australian blocks. Having the foreign stakeholders work together was one of the government’s demands, as part of a more comprehensive 650-kilometer north-south railway project.
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There’s been no comment from any of the impacted companies about Interim President Doumbouya’s order.
Why The Cessation Order is Bad News For China:
- AUSTRALIA: Simandou has long been regarded by Chinese policymakers as the best way to end its current dependence on Australian iron ore. Until Simandou, China had been unable to find a source of iron ore that could offer the same scale and quality that Australia provides. China has unofficially sanctioned a number of Australian exports to retaliate against what it perceives as politically hostile positions on issues ranging from Australia’s role as a founding member of The Quad to its request for a thorough COVID-19 origin investigation.
- VOLATILITY: Although iron ore prices have bucked the same price surges that other commodities have seen in recent months, the Simandou decision will likely contribute to heightened demand. With 8% of the world’s supply from Russia and Ukraine now off the market plus reduced output from Brazil (one of the world’s largest suppliers), the suspension order in Guinea will no doubt contribute to market unease. For China, iron ore supply constraints will likely push up the cost of steel just as the Chinese economy is facing strong headwinds.
Published in partnership with The China Africa Project
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