Rio’s $20 Billion Iron Project Advances as Ebola Wanes

Rio Tinto Group is preparing to restart work on developing the world’s largest untapped iron-ore resource after West Africa’s Ebola crisis curbed progress on the $20 billion project.

“There are people considering returning to site, they are not quite there yet,” Alan Davies, the chief executive officer of Rio’s diamond and minerals unit who’s also in charge of work on Simandou, said today in an interview in Melbourne. “We remain on a very vigilant standing for Ebola, what we don’t want to do is to let our guard down.”

Rio, the world’s second biggest iron-ore exporter, now expects a feasibility study on the project in southeastern Guinea will probably be completed this year and will resume construction projects stalled amid the outbreak. The London-based producer said in July it expected the study to be completed in about 12 months.

“Investors will want to know the timeline,” said Evan Lucas, a Melbourne-based markets strategist at IG Ltd. “The market conditions at this second aren’t conducive, though in the future there’s the ability to develop a really core asset.”

Guinea is seeking to declare itself free from Ebola by the end of this month, while schools reopened last month. The outbreak has infected more than 22,000 people and killed almost 9,000, mostly in Liberia, Sierra Leone and Guinea, according to the World Health Organization.

The number of people working at Simandou was limited in August in response to the Ebola outbreak, with only small numbers remaining to carry out road building projects in recent months, Davies said. None of the 3,000 workers who had been employed at the site, or their families, have contracted the virus, he said.

Prices Tumble

“We’ve rescheduled whatever work we need to do, and our priority is completing the feasibility study,” Davies said.

Rio Tinto rose 0.7 percent in Sydney trading to A$60.60, extending its advance this year to 4.5 percent.

Investments in iron ore projects have been put into question as prices tumbled 49 percent over the past year, to its lowest since May 28, 2009. BHP Billiton Ltd., the biggest miner, has declared the era of spending as over as producers complete a $120 billion spree to boost the capacity of their mines from Australia to Brazil.

In November, Rio said it was deferring a final decision on its proposed Silvergrass mine in Australia.

Rio in May agreed to an investment accord with Guinea’s government on the potential $20 billion iron-ore mine, port and rail project. Simandou could produce an estimated 100 million metric tons of the steelmaking ingredient a year, according to Rio, which last year had total output of 295 million tons.

Mining Permits

With a likely four-year construction program, Simandou would be poised to meet rising demand for iron ore driven by urbanization in parts of Africa, including probable infrastructure projects in Nigeria, Davies said. “The 2020s look prospective for additional demand growth,” he said.

Rio’s agreement with Guinea’s government covers two of four mining permits for an ore-rich area in the country’s southeast.

Talks are underway with potential investors in the project’s 650-kilometer (404-mile) railway and port infrastructure component, Rio and its partners Aluminum Corp. of China Ltd., International Finance Corp. and the government of Guinea said in May.

“There are lots of people interested, lots of people assessing the risk,” Davies said today. “We need funding from a wide variety of sources and Rio’s focus is plain. We want to focus on the mine, the infrastructure is nation-building.”

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