Rio Tinto shoulders Simandou iron ore bill as Chinese funds delayed - sources

China Hongqiao

18/09/2023 13:47

By Clara Denina
       LONDON, Sept 18 (Reuters) - Rio Tinto  RIO.L   RIO.AX 
has been solely funding preparatory work at the blocks it holds
at Simandou, one of the world's largest untapped iron ore
deposits, as its Chinese partners are yet to make their funds
available, two sources close to the matter said.
    The Anglo-Australian miner owns two of four Simandou mining
blocks as part of its Simfer joint venture with China's Chalco
Iron Ore Holdings (CIOH) and the government of Guinea, where the
mine is located. 
    It has so far spent more than $500 million on developing the
project that should have been split with CIOH, due to a delay in
the Chinese consortium getting state approval on the financing,
the sources said.
    CIOH is 75% held by Aluminum Corporation of China (Chinalco)
and 20% by Baowu Steel Group, with China Railway Construction
Corporation (CRCC) and China Harbour Engineering Company (CHEC)
each holding 2.5%. 
    "The worry is that if their (Rio's) partners don't get
approval from China on their funding, the money will deplete,"
added one of the sources, who declined to be named because the
information is not public.
    Rio declined to comment. Chinalco, Baowu, CRCC and CHEC did
not respond to Reuters' requests for comment.
    Most Chinese companies are backed or owned by state
entities, their financial approvals complicated by convoluted
structures amid an economic slowdown that has seen the world's
second-largest economy struggle after a brief post-COVID
recovery. 
    With a complex ownership structure, Simandou has been
haggled over for years, its construction delayed by legal
wrangling, Guinea's political changes and the difficulty and
cost of the 600 km of rail and port that need to be built to
export the ore from the mines in the southeast of the country. 
    Raphael Gnambalamou, a director-general at Guinea's mines
ministry said that "the project is moving well".
    Simandou's other two blocks are owned by the Winning
Consortium Simandou (WCS), made up of Singapore-based Winning
International Group, Weiqiao Aluminium - part of the China
Hongqiao Group  1378.HK  - and United Mining Suppliers.
    A WCS spokesperson said in an email that the consortium had
been "steadfastly progressing with our construction work" on
Simandou blocks 1 and 2 and associated infrastructure
development, with a workforce of more than 10,000. 
    Simfer and its contractors have employed around 3,000 people
so far, after agreeing to share capacity and associated costs
for the trans-Guinean rail line of the project with WCS. 
    Rio earmarked $800 million for its share of the development
in 2023 and around $2 billion a year in 2024 and 2025.

 (Reporting by Clara Denina; Additional reporting by Felix Njini
and Amy Lv; Editing by Jan Harvey)
 ((Clara.Denina@thomsonreuters.com;))