Rio’s Guinea Ore Project Faces Three-Year Delay to 2018Michelle Yun and Elisabeth Behrmann
Rio Tinto Group, the world’s second-largest mining company, said its $20 billion Simandou iron-ore project in Guinea may start in 2018 at the earliest, three years behind the initial target, pending completion of funding.
“The production date will come out to be what it will be once the investment framework is concluded and the financing is put in place,” Alan Davies, chief executive officer of London-based Rio’s diamonds and minerals division, who is also responsible for Simandou, said today in Hong Kong. “If everything goes extremely well and rapidly, the production will be around 2018.”
Rio’s Chief Executive Officer Sam Walsh said last month that meeting the target of first production by 2015 would prove difficult. The company, which last year sold a 44.65 percent stake in Simandou to state-owned Aluminum Corp. of China Ltd. for $1.35 billion, is helping Guinea get financing for its half share of the project’s port and rail.
“The government of Guinea has confirmed that it will not fund its 51 percent share of the infrastructure, so clearly all the partners will have to work closely together to come up with a financing plan,” Davies told reporters in Hong Kong. Rio and its partners will talk with a range of possible investors, including sovereign wealth funds and construction companies, he said.
Rio reached an agreement with Guinea that would allow a third party to fully fund the transport links, Walsh said at a briefing in London last month.
China has begun looking at funding a railway and port that would service the iron-rich project and would cost more than $10 billion, four people with direct knowledge of the matter said in August. The agency overseeing companies owned by China’s central government has gauged interest from state rail and port builders and also contacted China Development Bank Corp. about providing financing, said the people.