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  1. #1
    WHT-BR Top Member
    Data de Ingresso
    Dec 2010

    [EN] Rio Tinto seals $20bn iron ore development project with Guinea

    LONDON –A landmark agreement on Monday has brought an end to three years of contractual wrangling over how best to develop Africa's biggest mining project, a $20 billion iron-ore deposit nestled in the remote forests of Guinea.

    But even though Monday's deal resolves years of contractual uncertainty, it sets a new challenge: Finding deep-pocketed investors willing to spend tens of billions of dollars building the railroad and port needed to make the huge deposit economically viable.

    For months, Rio Tinto and its partners Aluminum Corp. of China Ltd., or Chalco, and the International Finance Corp., the private-sector arm of the World Bank, have been in talks with President Alpha Condé's reformist government to figure out a way for the Simandou mine to be financed and executed.

    Rio Tinto currently holds a license to mine around half of the deposit, around $10 billion worth of iron ore at current prices. The infrastructure and mining project will cost an estimated $20 billion to build, of which two-thirds is infrastructure costs.

    Part of the new plan unveiled on Monday is to create a new consortium to fund and manage the construction of a 650 kilometer railway from the mine to Guinea's Atlantic coast, as well as building a deep-water port to ship the iron ore to China and Europe.

    Rio Tinto and its partners will now pitch this idea to potential financiers. Investors will be offered decades of steady yields, generated through tariffs charged on goods transported by rail, all the while helping one of the world's poorest countries transform its economy.

    "We are already in serious talks with around 30 different institutions," said the person, who wasn't authorized to speak publicly on the matter.

    Sovereign-wealth funds, private equity, iron-ore customers and export credit agencies are among those who have been approached, said the person, though they declined to specific which ones.

    In a phone interview, Guinea's Mining Minister Kerfalla Yansané said U.S. giant General Electric had already expressed an interest in participating in the new consortium.

    GE couldn't wasn't immediately available for comment.

    Concluding a financing deal could finally push the mine into production by early 2019, bringing in foreign investment and creating tens of thousands of jobs.

    "This project is of critical importance for the people of Guinea. It's a nationwide priority that goes beyond the mines and far beyond our generations," said Mr. Condé.

    By linking a publicly listed multinational with a Chinese state-owned company and a global development financing body, Monday's deal breaks new ground in bringing together a disparate set of groups whose African interests don't always converge.

    "Today is an important milestone in the development of this world-class iron ore resource for the benefit of all shareholders and the people of Guinea," said Rio Tinto Chief Executive Sam Walsh.

    The pact, which will have to be ratified by parliament, consolidates a dizzying array of existing agreements signed with Mr. Condé's predecessors. It also hands Guinea a significant share of the project, potentially growing to a 35% stake over the next 20 years.

    Simandou has had a fraught history since Rio Tinto first secured exploration rights in 1997.

    Already stymied by the lack of rail and port infrastructure, plans to turn it into a working mine have been further complicated by political upheavals, commodity-price volatility and contractual wrangling.

    Mr. Condé, a veteran opposition leader elected in 2010 on a promise of securing fairer deals for Guinea's mineral riches, has sought to promote an agenda of transparency and good governance. However, Guinea's recent history contains enough examples of broken government promises to make some funders cautious.

    The architects of the deal, senior executives at Rio Tinto and the IFC, say that was part of the reason they sought to conclude a clear and legally watertight framework agreement before raising the financing.

    "This agreement is bankable, if it gets ratified by parliament. It's a very solid framework. We haven't had that yet. It enables us to have discussions with potential lenders," said the executive at the IFC.

  2. #2
    WHT-BR Top Member
    Data de Ingresso
    Dec 2010

    Rio Tinto seals $20bn iron ore development project with Guinea

    Rio Tinto regained its West African foothold.

    Rio Tinto pledged to press ahead with one of Africa's largest industrial projects after striking a deal with Guinea's government over the $20bn development of a giant iron ore deposit.

    The agreement over Simandou's mineral resources could lead to the miner bringing a substantial supply of African iron ore to global markets within five years, while Guinea's mining minister said the development would be a "game changer" for one of the world's poorest countries.

    "There will be before-Simandou and after-Simandou. With Simandou, our country is expected to have a double-digit growth rate very soon," Kerfalla Yansane, mining minister, told the Financial Times.

    However, Rio and Guinea's government acknowledge the delayed project could slip beyond its fresh 2018 target date for commercial production.

    Sam Walsh, Rio's chief executive, and Alpha Conde, Guinea's president, on Monday signed an investment framework to develop Simandou, cementing the company's return to favour in the country after it was stripped of its rights to part of the deposit in 2008.

    Rio's plans to push ahead with Simandou come as the company has cut capital expenditure to pacify investors after years of costly expansion. It also comes as the price of iron ore has weakened amid doubts over demand. Iron ore is mainly used in steelmaking in China. In response Rio has tried to curb exposure to Simandou by agreeing to find outside parties to build the 650km railway and port that account for about two-thirds of the $20bn cost estimate, while accepting that others may use the infrastructure.

    Multi-user access is crucial to Guinea's hopes of creating tens of thousands of jobs in a "growth corridor" along the railway.

    Mr Yansane said the "tentative timeline" for first production was now the end of 2018. Rio's backer in the project, Chinalco, a Chinese state metals company, was "very keen to see this project getting off the ground", he said.

    The deal gives Guinea a free 15 per cent stake in the project while giving Rio and its partners an eight-year income tax exemption once the mine opens.

    Rio is on track to produce 290m tonnes of iron ore this year and 350mt in 2017. A further 100mt would come from Simandou when fully operational. While some analysts say miners could push the iron ore market into oversupply, Rio argues that the high-quality Guinean ore will help China produce steel while meeting environmental targets.

    Rio's rights to Simandou's northern half were confiscated and handed to BSG Resources, the mining arm of Israeli tycoon Beny Steinmetz's business empire, in 2008. In April, the government cancelled the rights held by BSGR and Vale, its partner, after a two-year inquiry found BSGR had won them through corruption. BSGR denies the allegations and says it is preparing an arbitration claim against Guinea.

  3. #3

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