(Ecofin Agency) - In early March, Guinean authorities ordered the cessation of development operations at the Simandou deposit, which has a 100 million tons per annum iron ore production capacity. The official reason was that public authorities wanted to preserve the public interest. 

Guinea's transitional government announced last weekend a historic framework agreement with the two firms developing the Simandou Iron deposit. The said firms, Rio Tinto Simfer and Winning Consortium Simandou will partner for the construction of “Transguinéen”, a 670-km railway, to transport the iron ore produced at Simandou to Moribaya deep seaport.  

The framework agreement was announced two weeks after the decision issued by President Mamadi Doumbouya suspending all the operations related to the iron ore exploitation project.

We "would like to thank [...] these two partners who have put aside many egos, many other interests to return to what is a win-win partnership for all parties," commented Moussa Magassouba, Guinean Minister of Mines, on state TV.

Under the terms of the new tripartite contract signed on the night of Friday, March 25, the Guinean state obtains a free and non-dilutable 15% stake in the rail, port, and mine. Also, once completed, the infrastructures built in the framework of the project will all become state property and a public agency will be created to manage them.  

The new framework agreement greatly differs from the previous one binding the Guinea government and the companies in charge of the development of the Simabdou iron ore project. Under that previous agreement, the state had no stake in the port, mine, and railway. The infrastructures would have become state property 35 years after completion. With the new agreement, those infrastructures can now be used not only for the transportation of iron ore, but also for goods, farm products, and residents. It will also be used by other mining firms that will set up operations in the Southeastern part of the country.

Under the new framework agreement, a project schedule has also been agreed on with Rio Tinto Simfer and Winning Consortium Simandou setting December 31, 2024, as the deadline for completion of the rail and port infrastructure. By March 31, 2025, the firms are expected to launch commercial production.

Major “sanctions” are also planned if Rio Tinto Simfer and Winning Consortium Simandou fail to meet the deadlines. For government spokesman Ousmane Gaoual Diallo, the sanctions can include “the outright withdrawal of mining titles.”  

The agreement also includes a component highly sought by President Mamadi Doumbouya: the ‘local content.’ Whenever possible, Guinean firms will be contracted and the foreign firms hired for various contracts in the framework of the project are required to form joint ventures with local companies before carrying out their operations.

Rio Tinto Simfer and Winning Consortium Simandou are also required to train and transfer expertise to Guineans.

“This framework agreement will allow the joint development of this gigantic project […],” commented Fadi Wazni, chairman of Winning Consortium’s board, adding that both infrastructure and mine development activities will receive a US$15 billion investment.

The Simandou iron deposit hosts up to 4 billion tons of ore, according to government figures. In early March, US bank JP Morgan published an analysis revealing that the four blocks of the iron deposit have an annual production capacity of 100 million tons. The two blocks managed by Winning Consortium Simandou can produce 60 million tons per annum.

Winning Consortium is a consortium of Chinese, French, Singaporean, and Guinean firms while Rio Tinto Simfer is a joint venture between China's Chinalco and Anglo-Australian Rio Tinto.

Emiliano Tossou