New York, United States — 24 April, 2013 – The Rio Tinto Group is unlikely to develop its US$10 billion iron ore project in Guinea in the foreseeable future as the African state struggles to fund the transport links required for the massive operation.
“The Simandou project has been effectively frozen,” former Guinea mines minister Mahmoud Thiam said in an interview here with Bloomberg News. “I see it being frozen for the foreseeable future,” he added. The London-based mining company said plans for mining were proceeding.
Rio Tinto has spent US$2.3 billion on Simandou, which would be one of the largest mines in Africa, CEO Sam Walsh said in London last week. Progress in the venture relies on the West African country’s government coming up with US$5 billion to fund half of the planned infrastructure, which it said last month it would succeed in doing.
Thiam said he doubted Guinea’s ability to make the investment. “They’ve been trying to get funding for the past two and a half years.”
Guinea’s US$5.1 billion economy is forecast to grow 5% this year as it seeks to put two years of military rule until November 2010 behind it, according to budget minister Mohamed Diare.
Simandou is due to start production in 2015 and in June 2012 Rio allocated US$501 million to building railways and ports for the project.
“The current priority is finalising the investment framework and for the government of Guinea to secure its financing,” Rio spokesman Illtud Harri said in an e- mailed response to questions.
The rights to part of Simandou are at the heart of a U.S. probe into whether BSG Resources Limited (BSGR), the mining company controlled by Israel’s richest person Beny Steinmetz, paid bribes to win licences. Thiam is tied to the investigation, a person familiar with the matter said last week. That link discredits the former minister’s views on the project, a Guinea government spokesman said.
“Thiam is not a good source,” Moussa Cisse, the director for press affairs at the office of Guinea’s president, said in a phone interview. “He has also been identified in this probe. He no longer has any credibility.”
Thiam said he hasn’t been contacted by U.S. or Guinean authorities in connection with the investigation.
BSGR acquired rights to part of the Simandou project, one of the world’s richest iron-ore deposits, in 2008 after Rio Tinto had been ordered by the government of Guinea to give up a section of its licence area. BSGR subsequently sold 51% of its Simandou stake to Brazil’s Vale SA in 2010 for US$2.5 billion.
Source: Bloomberg News. For more information, click here.