Guinea: Fierce power struggles at Simandou Mine

By Diawo Barry
Posted on Wednesday, 30 March 2022 10:40

Crucial for the Guinean economy, the Simandou site in the country’s south-east is one of the largest iron ore deposits in the world: its reserves are estimated at 2.4 billion tn. © Rio Tinto.

The suspension of work related to the exploitation of the mega-iron deposit in South-Eastern Guinea has taken its private operators, SMB-Winning and Rio Tinto, by surprise.

Tensions between government authorities and the mine’s operators at Simandou have been wrenched up a notch. Even though the consortium SMB-Winning and the Rio Tinto group – who are both involved in operations at the site – claimed to be working on the project, Colonel Mamadi Doumbouya, who has been in charge of the country since the September 2021 coup, announced a surprise suspension of all activities.

The announcement at the Council of Ministers meeting on 10 March was made as participants were “awaiting answers to the questions posed to the various actors and clarification of the modus operandi in which Guinea’s interests will be preserved”. Neither of the two private companies wished to comment on the authorities’ decision.

According to information from our sister publication, Africa Business+, the suspension comes in response to “local content” grievances aired by the National Council of Employers of Guinea (CNPG) against the Chinese-Singaporean-Guinean consortium SMB-Winning – the most advanced operator as far as the development of its permits is concerned.

Disagreement over pooling infrastructure

As the holder of blocks one and two, SMB-Winning is working overtime to build the 670-km railway line that will link the mine to the port of Matakong (in the southwest). The project has been entrusted to 12 companies, says Fadi Wazni, the managing director of United Mining Supply (UMS, one of the companies in the consortium) who is also the chairman of SMB’s board of directors. “Each one has a very precise schedule. The technical teams oversee the execution and send weekly reports.”

Meanwhile, the consortium has just finalised a feasibility study on the iron ore mine, which is scheduled to launch production in 2025. The mining giant Rio Tinto, which holds blocks three and four, indicated at the beginning of the year through its managing director, Jakob Stausholm, that it had launched a new drilling programme and the submission of bids for accompanying work to be carried out this year while continuing negotiations with SMB-Winning and the authorities on the pooling of infrastructure – particularly on the use of the railway.

It’s a very large project with multiple actors, financial institutions, shareholders … Each step requires a lot of precautions.

During another Council of Ministers meeting on 3 March, Mamadi Doumbouya had expressed his dissatisfaction, deploring the lack of a deal and asking Prime Minister Mohamed Béavogui to “bring together the ministers by sector [and] the partners to find an agreement that preserves the interests of Guinea and the other parties”.

But why have the discussions stalled? “It’s a very large project with multiple actors, financial institutions, shareholders … Each step requires a lot of precautions,” says UMS’ Fadi Wazni, adding that they are “certain to reach an agreement”.

Sharing the financial envelope

“The state has to draw up the collaborative structure between the two companies and define the terms of the agreement, including how to share the financial envelope between them,” says Amadou Bah, president of the NGO Actions Mines Guinée (Guinea Mine Action), which is at the forefront of the sector. “Each company is mobilising its own networks in an attempt to ward off the other and fulfil its own intentions”, not to mention that the two camps don’t share the same degree of involvement.

Though SMB-Winning wants to move quickly, Rio Tinto remains more hesitant. The Anglo-Australian giant, which has been involved in Simandou since 1995, tried to withdraw in 2016 but failed. It was not until 2018 that it suspended its development work. Even though it can assure a certain technical quality in terms of local content, the multinational has invoked difficulties in mobilising funds for the construction of infrastructure. Now it is expected to build nearly 100 km of railway between its mine in Beyla and the point of intersection with the WCS route.

Ultimately, Amadou Bah points out, the two groups still need to agree on “the construction standards, the mutual operation of the railway and the evacuation port, as well as the financial implications of such an operation”.

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