Guinea: Rio Tinto & WCS at an impasse over the Simandou project

By Maher Hajbi
Posted on Wednesday, 6 July 2022 12:12

Simandou, Guinea. © DR.

The exploitation of the world's largest iron ore deposit, which was relaunched in March, is now at a standstill. Why? Rio Tinto and the Winning Consortium have failed to comply with the ultimatum given by Mamadi Doumbouya, head of Guinea’s transitional government.

In mid-June, Mamadi Doumbouya, who became transitional president following a military coup in Guinea, imposed a 14-day deadline on Rio Tinto and the Winning Consortium Simandou (WCS) to create a joint venture to exploit the Simandou iron ore deposit. Three weeks later, nothing has been done and tensions have risen.

In a statement released on 4 July, the Simandou project’s strategic committee, which is led by the head of the ruling junta, decided to order an “immediate” halt to all activities of the Anglo-Australian mining company and the Chinese-Singapore-Guinean company on blocks 1, 2, 3 and 4 of the world’s largest iron ore deposit.

Guinea “willing to exchange”

“After months of tough negotiations with the leaders of these two entities,” the transitional authorities point out that the deadlines were not met. “The partners hardly show their willingness to respect their commitments. […] They are still reluctant to sign the statutes to create the joint venture,” says the strategic committee.

Doumbouya feels that the two mining companies are allowing this blockage to continue to the detriment of the project’s interests, particularly with regard to the formulation of the terms of the state’s participation in the joint venture. “Winning Consortium Simandou (WCS) and Rio Tinto Simfer are colluding to deny Guinea its rights as a co-shareholder and at the same time obstructing the project’s development,” said the head of the ruling junta.

“We note a gap between your vision of the implementation of the terms of the framework agreement and our expectations. The Guinean state not only finds this situation regrettable but also unacceptable,” he said on 17 June. Today, he says he is keeping “the doors of discussion open”, stressing that “Guinea remains willing to exchange with new partners” to create the joint venture and move forward with the Simandou project.

Construction of a railway

After reassuring the foreign groups that their agreement would be maintained, Doumbouya, dissatisfied with the returns of the project for Guinea, lobbied for the investment and infrastructure conditions of the Simandou mining project to change. In March, wanting to see “national interests […] preserved by [the] foreign operators”, he ordered that all activity on the site of the huge iron deposit cease.

Following this pressure tactic, an agreement was concluded after less than two weeks of very tense negotiations.

The Guinean government and the private players signed a deal to build a railway from Beyla to Forecariah (670 km) linking the deposit’s four blocks to the Moribaya deep water port. The contract also stipulates that a joint venture be created to develop the project by mutual agreement and that 15% of the railway and port be granted to the state, in addition to the 15% of the ore it already had.

The Anglo-Australian mining company and the Chinese-Singapore-Guinean company had also committed to completing infrastructure construction by December 2024 and starting commercial production at Simandou by the end of March 2025. At this rate, both partners risk penalties up to and including the withdrawal of their mining titles.

Understand Africa's tomorrow... today

We believe that Africa is poorly represented, and badly under-estimated. Beyond the vast opportunity manifest in African markets, we highlight people who make a difference; leaders turning the tide, youth driving change, and an indefatigable business community. That is what we believe will change the continent, and that is what we report on. With hard-hitting investigations, innovative analysis and deep dives into countries and sectors, The Africa Report delivers the insight you need.

View subscription options