June 7 (Bloomberg) -- Rio Tinto Group, the world’s second-biggest mining company, said its Simandou iron-ore mine project in Guinea has attracted interest from sovereign wealth funds.
The development, a venture with Aluminum Corp. of China Ltd., has attracted “strong interest from other sovereign wealth funds and international financiers,” Alan Davies, president of international operations, said in a slide presentation posted on London-based Rio’s website today. The company has spent $1.5 billion at the West African site to-date and production is scheduled to start in 2015, it said.
Simandou has been described by Rio Tinto as one of the world’s biggest undeveloped iron-ore deposits, with a resource of 2.4 billion metric tons of the steelmaking raw material. Baosteel Group Corp., China’s second-largest steelmaker, is “very interested” in participating in Simandou, Chairman Xu Lejiang said in an interview in Shanghai last month.
Prices for iron ore delivered to China, the biggest buyer, have risen almost threefold in the past two years as demand from steelmakers in the country has surged.
“They must find a partner in China,” Xu said last month when asked whether he would be interested in partnering with Chalco, as Aluminum Corp. is known. “Chalco must sell iron ore to China from its investment because it isn’t an iron ore user.”
The Simandou project also includes a 650 kilometer (404 mile) railroad and four-berth wharf. The total development cost will be more than $10 billion, Rio said today.
The site may cost as much as $19 billion to develop, based on similar expansions by BHP Billiton Ltd. in Western Australia, JPMorgan Chase & Co. said in an April report. Chalco agreed to pay $1.35 billion for a 44.65 percent stake.
Rio said in April it had agreed to pay Guinea $700 million in a so-called settlement agreement. The accord “gives us the certainty we need to allow us to invest and move forward quickly,” Sam Walsh, chief executive officer of Rio’s iron ore unit, said at the time.
The settlement came after President Alpha Conde ordered the drafting of a policy giving the country at least a one-third stake in mining projects. Guinea has the right to take as much as a 35 percent stake in the mining assets at Simandou and a 51 percent self-funded interest in the infrastructure assets, according to the slide presentation today.
The cash price of 62 percent-iron ore arriving at China’s Tianjin port almost tripled to $170.20 a ton by June 6, from Nov. 21, 2008, when data became available, according to the Steel Index.
Rio is the world’s second-largest mining company by sales, trailing BHP Billiton. Brazil’s Vale SA is the third-largest.
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