News Column

Rio Tinto Signs Investment Framework For USD20 Billion Simandou South Project

May 27, 2014

Alice Attwood

LONDON (Alliance News) - Rio Tinto PLC has signed an investment framework for blocks three and four of the Simandou project with the Government of Guinea, the Aluminium Corporation of China, and the International Finance Corporation.

The Simandou South project, which is worth an estimated USD20 billion, is an iron ore mining development located in the south-east of Guinea and will be the largest combined iron ore and infrastructure project ever developed in Africa, said Rio Tinto.

The Investment Framework provides the legal foundation for the project to move forward, said Rio Tinto, and comprises a set of documents that define the financial and commercial relations between the project's partners.

The IF builds on the 2002 Convention de Base, between Simfer S.A. - owner of the mine - and the Republic of Guinea which documented the terms relating to the iron ore mine and the supporting infrastructure.

The signing of the framework marks a significant milestone in the project's development and provides the legal and commercial foundation for the project, said Rio Tinto, and allows the project to move towards realising the opportunities it presents for Guinea and all the shareholders.

The project partners include Rio Tinto (46.57%), the Republic of Guinea (7.5%), Aluminium Corporation of China (41.3%) and the International Finance Corporation (4.625%), a member of the World Bank Group.

The project comprises three principal components said Rio Tinto; a high-grade iron ore mine (at blocks three and four of Simandou) of 100 million tons per year at full production; a new 650 kilometre trans-Guinean multi-user railway to transport iron ore to the Guinean coast; a new deep-water multi-user port in the ForÉcariah prefecture.

The infrastructure and mining project will cost an estimated USD20 billion to build, of which two-thirds is infrastructure costs.

The project is also set to bring economical benefits to Guinea; when fully operational, Simandou has the potential to double the country's current gross domestic product as it will create significant local employment opportunities. At full capacity, Rio Tinto estimates the project will stimulate an estimated 45,000 jobs throughout the economy. It will also induce subcontracting and procurement activities, new and upgraded roads, as well as the development of fibre and wireless communications which will underpin indirect economic development for communities along the infrastructure route, known as the Southern Growth Corridor.

"This estimated USD20 billion project... will boost Guinea's whole economy and spur our Southern Growth Corridor through mining, agriculture, forestry, livestock and trade. It's about unlocking our huge potential, supporting our efforts to tackle poverty through jobs creation and economic diversification, and getting more attractive to foreign direct investment," said State Minister of Mines and Geology of the Republic of Guinea Kerfalla YansanÉ.

The parties, under the leadership of Rio Tinto, are also working together to assemble a consortium of investors who will finance, build and own the multi-user 650 kilometre railway and deep-water port infrastructure within the agreed timeframe and along procedures laid down by the Bankable Feasibility Study and involving all parties, said the firm.

"The signing of the IF is testimony to the commitment of all the partners to progress the Project and is the culmination of years of collaborative and tremendous work. We will now concentrate on progressing the plans for the development of the mine and pulling together the consortium of investors who will finance and develop the infrastructure," said Alan Davies, Chief Executive of Diamonds & Minerals Rio Tinto.

Shares in Rio Tinto were trading 0.58% lower at 3,240 pence per share shortly after the market open Tuesday.

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Source: Alliance News

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