Miningweb: FT - How the world’s biggest mining project, in Guinea, is a win for China

Key topics:Simandou mine: $23bn project set to transform Guinea’s economy.Chinese-backed venture shifts iron ore power from Australia to China.High-grade ore could boost green steel, reduce global carbon emissions..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa's bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..By David Pilling in Simandou and Leslie Hook in London.With a price tag of at least $23bn, it is the biggest mining project in history.Some call the Chinese-led venture the “Pilbara killer” for its potential to upend the domination of the iron ore industry by Australia. Others say that the mine’s high-grade deposits — “the caviar of iron ore” — could help catalyse a green revolution in steelmaking by sharply reducing the energy required to make it.To the 15mn people of Guinea who are hoping that the massive mine can change the fortunes of an entire west African nation, the project — which will be inaugurated at a grand ceremony on Tuesday — is known by one word: Simandou.When in a few years Guinea reaches maximum production of 120mn tonnes of iron ore a year, it is expected to be among the world’s fastest-growing countries. The government talks about quadrupling the size of Guinea’s economy by 2040, implying an average annual growth rate of nearly 10 per cent.“We have an opportunity to change the size of our country and the life of our people,” says Bouna Sylla, Guinea’s mining minister. Simandou 2040, as the country’s much-trumpeted development plan is known, envisages spurring investment of $200bn in roads, refineries, industrial parks, schools and agriculture, he says.Citing Vietnam and Singapore, the minister adds: “These countries show us that, if you’re serious and you have strong leadership, you can change the paradigm.”Guinea’s newfound optimism comes after almost three decades during which Simandou has been a cautionary tale about what happens when a wall of western money hits a wall of iron ore in a poor African country. Since Rio Tinto, the Anglo-Australian mining company, first won the right to explore the mountain range in 1997, Simandou has been the subject of multiple bribery scandals, political machinations and bitter corporate rivalries thrashed out in international courts..Read more:.Miningweb: BHP-China iron ore dispute escalates, risking months of trade gridlock.has become a story of how Chinese capital and engineering prowess have unlocked a mega-project that was simply too big for any single western company to complete.The start of production at Simandou now has the potential to tilt power in the iron ore market — one of the world’s most traded commodities — decisively towards China, which as the biggest consumer has been involved in a two-decade-long tug of war with Australia and Brazil, the largest producers.“It is a game-changer, because it is such a big addition of new supply,” says Erik Hedborg, an analyst at research group CRU. “We haven’t seen anything like this in a long time.” Conditions are so harsh in the remote forest where Simandou is located that, even today, Rio’s standard induction video warns of snakes and malaria. It wasn’t until the late 1990s that geologists working for Rio confirmed the industrial quantities of ore that were formed in the mountain some 3bn years ago.By that geological yardstick, the almost three decades it has taken to develop the mine, along with nearly 650km of railway and a purpose-built port, is the blink of an eye.But in that time, Guinea has had two coups and four presidents while Rio, which once owned rights to the entire iron ore deposit, has seen six chief executives come and go.Over a series of twists and turns stretching back nearly two decades, Rio’s original 100 per cent stake has been whittled down to 25 per cent. Alongside the Guinean government, which has a 15 per cent stake, Rio’s joint venture partner in two of the mine’s four blocks is Chinalco, the Chinese state-owned aluminium group.The other two blocks, situated 70km away, are controlled by the Chinese-Singaporean Winning Consortium Simandou (WCS) in what Guinean ministers refer to as the “Asiatic half” of the mine. Key investors include Baowu Steel Group, the world’s largest steelmaker, and Winning International Group, a Singaporean shipping and mining conglomerate. Its founder and chair, Chinese-born Sun Xiushun, has helped transform Guinea into the world’s biggest exporter of bauxite, the main ingredient of aluminium.Chinese companies only got a crack at Simandou thanks to the mining project’s lurid history. In 2008, Guinea’s then dictator, Lansana Conté, stripped Rio of half the mine and later, on his deathbed, transferred it to BSG Resources, the mining arm of a conglomerate run by Beny Steinmetz, the buccaneering Israeli diamond entrepreneur.Steinmetz flipped half his share in 2010 to Vale of Brazil for $2.5bn, virtually all profit. He was later handed a five-year sentence by a Swiss court for bribing Guinean officials, including making an $8.5mn payment to Conté’s fourth wife, Mamadie Touré. The sentence was later reduced to three years.A former adviser to BSG Resources admitted he had offered Touré money to destroy incriminating documents, not knowing that she was wearing a listening device monitored by the FBI.Steinmetz maintains his innocence and the appeals process is ongoing. BSG Resources has consistently denied wrongdoing. Vale, which later left the project, said it had been duped and has pursued BSG Resources for damages.In a separate case, Rio paid $15mn to the US Securities and Exchange Commission (SEC), which found it had violated the Foreign Corrupt Practices Act by breaching accounting rules in relation to payments made to a consultant. Rio consented to the order without admitting guilt.For years, Rio and Vale balked at the massive costs involved in developing the railway, port and mine, leaving Simandou idle. But when WCS, the Chinese-Singaporean conglomerate, was awarded the two BSG Resources-Vale blocks in 2019, it quickly started work on the railway needed to carry wagons of ore hundreds of kilometres through thick forest to the coast.Perhaps more than any single person, today’s grand opening owes its existence to General Mamadi Doumbouya, then a 36-year-old colonel who seized power in Guinea in 2021 after his elected predecessor overstayed his constitutional term. Doumbouya has tied the reputation of his presidency, which he is seeking to legitimise in elections next month, to the successful completion of Simandou.In Conakry, the seaside capital now dotted with tanks, there are huge pictures of the president in crisp military uniform, often near posters proclaiming Simandou 2040. Slogans link the mine’s success to the president’s vision. One reads: “To lead is to build.”Sylla, the mining minister, says it took Doumbouya’s vision to force Rio and its Chinese partners to share the massive costs of the railway and port, rather than doubling up. “The president is a soldier and in terms of strategy, the best training is the military,” he says.It was Doumbouya who set the punishing timetable culminating in today’s inauguration — more of a soft launch — conveniently timed just a few weeks before the election.Doumbouya, who moulds himself after Paul Kagame, Rwanda’s effective if authoritarian leader, had other stipulations for investors. He insisted that Guinea get a 15 per cent stake, not only in the mine itself, but also in the logistics company that runs the railway and port. Investors strongly resisted. In one tense, late-night meeting, a Guinean lawyer was instructed to slam the door on their way out as a sign of Guinea’s resolve.The president also stipulated that Simandou purchase American locomotives to run on Chinese rails. When WCS tried to take delivery of Chinese locomotives, Guinea had them shipped back. Wabtec of the US ended up winning the contract with locomotives manufactured in India. Alstom of France is doing the signalling. “It’s like the United Nations,” says one official, with another describing the balance of countries as a geopolitical hedging strategy..Read more:.Miningweb: China’s commodity demand surges as iron ore, copper and coal imports hit 2025 highs.Chris Aitchison, managing director of SimFer, the Rio-Chinalco consortium working on Simandou, praises Doumbouya for forcing the rival industrial partners to co-operate on infrastructure. “If you wanted Simandou to come alive, we all had to do things differently,” he says. “There’s a reason it hasn't happened in 27 years.” Now that Simandou is finally producing iron ore, the first shipload of which should be dispatched to China within weeks, it is poised to have a transformative impact on the iron ore market.Simandou will be adding to a market that is already oversupplied. More crucially, it will tip the balance of power firmly towards China and provide tough competition for Australia.Once at full capacity, Simandou will account for about 7 per cent of global iron ore that is traded internationally. But even that underestimates its full impact. Chinese companies currently own about 8 per cent of seaborne iron ore production, a figure that will nearly double in the coming five years, according to CRU.For decades, China, the world’s largest steel producer responsible for three-quarters of iron ore imports, has been a price taker. It has been forced to accept the terms of the big four producers — BHP, Rio Tinto, Vale and Fortescue. But recent efforts to centralise buying under the China Mineral Resources Group have seen steel mills band together to demand lower prices and better terms, including purchases settled in renminbi.Most analysts expect iron ore prices to drop to between $70 and $80 per tonne over the next two years, compared to about $100 today.If prices do decline that much, it will take significantly longer for Rio, Chinalco, Baowu and Winning to recoup their enormous capital costs. Guinean ministers are already strategising about how to counter what they predict will be Chinese efforts to suppress prices.One advantage Guinea may have is that Simandou’s ore, which has an average iron content of 65 per cent, is particularly well suited to the needs of steel mills seeking to reduce carbon emissions. As more mills shift towards producing “green steel”, by using less energy to melt iron, the high-grade ore produced by Simandou is likely to be in demand. Simandou’s ore is also suitable for a new breed of electric arc furnaces, which use electricity rather than coal for power.“There is a structural move to decarbonise, and one of the ways we can do that is to use higher-grade ore,” says Florence Sun, commodities strategist at Macquarie, the financial services group. “That’s the direction the world is going.”All of this poses a potentially existential threat to the Pilbara, Australia’s iron ore producing region, where declining grades and rising costs are making its output less competitive. The long-term demand picture for iron ore is basically stagnant, as China’s 20-year construction boom draws to a close.Australian producers are keenly aware of the threat. Andrew “Twiggy” Forrest, founder and chair of Fortescue, says the fact Simandou has finally been brought online — despite being “a very long way away in a reasonably unattractive political environment” — shows China’s determination to upgrade its iron ore feed.“The trend towards green iron ore and green steel cannot be denied,” he told the FT during a trip to Beijing. “You’re standing in front of a freight train.” Guineans understand the potential international ramifications of Simandou. But their prime concern is what impact it will have on their own country. “The vision of the president is very clear, which is to make Guinea an industrial country,” says one senior official.In September, S&P Global Ratings endorsed the growth potential, awarding Guinea its first-ever sovereign rating — B-plus with a stable outlook — opening its access to international capital markets.Key moments in the Simandou saga1997 - Rio Tinto is granted the first licence to explore four blocks of Simandou2008 - Lansana Conté, Guinea’s military leader, strips Rio of two of the blocks, awarding them to BSG Resources2010 - Vale buys 51 per cent of BSG Resources’ stake for $2.5bn2019 - Winning Consortium Simandou is awarded tender to develop BSG Resources-Vale blocks2021 - Mamadi Doumbouya seizes power, tying success of Simandou to his presidencyNov 11, 2025 - Simandou inauguratedAdvisers to Doumbouya say he is in deadly earnest about avoiding the resource curse that has plagued other countries. Guinea plans to funnel an as yet undetermined amount of revenue from Simandou into a sovereign wealth fund to be headed by a foreign national.In addition, 5 per cent of revenues from the mine and 20 per cent from the logistics company are to be hypothecated for schools and educational scholarships respectively in a country where more than half the population cannot read or write.There are also plans to build 3,000km of highways in the next 15 years. Guinea currently has less than 100km.Energy is another priority. As well as bringing electricity to the 50 per cent of Guineans who lack it, the government needs power for its grand industrialisation ambitions. Ministers say they will insist that Simandou’s investors build a pelletisation plant to turn ore into higher-value pellets — a step towards Guinea’s ultimate goal of producing steel.For its part, Rio says it is committed to a feasibility study on the pelletisation plant, but not necessarily to building a factory, a potential source of friction in the years ahead.In August, Doumbouya served notice of his intentions to drive a hard bargain when he revoked a bauxite concession awarded to Emirates Global Aluminium, transferring it to a newly created state entity, Nimba Mining. The Emirati company called it a “flagrant violation” of its legal and contractual rights, but Guinea insisted that the UAE company had defaulted on its obligations to build an aluminium refinery.Rio says it is not worried about political risk. “We’re not so concerned with who’s in government. It’s been a stable relationship whoever is in power,” says Aitchison, the head of the Rio-Chinalco consortium, perhaps forgetting Rio’s loss of half the mine in 2008 on a presidential whim.Daniel Driscoll, a mining lawyer at Gowling WLG who has worked across west Africa, says that Guinea’s current government is very supportive. “But over a 30-year horizon, resource nationalism is a risk that cannot be ignored,” he says, referring to the temptation to squeeze more money out of Simandou or even to expropriate it. “It could turn into a populist issue that will be very hard to resist.”Guinea’s advisers insist that, so long as investors honour their commitments, they have nothing to fear.There are other potential risks. One is what will happen when many of the 50,000 workers involved in construction — some of whom were doing paid work for the first time — lose their jobs. The mine, railway and port will need only 10,000 to 15,000 workers.Guinean officials say that plans associated with Simandou 2040, starting with an 850km “corridor” across the south of the country, will absorb much of the workforce.Another risk is to the environment. Aside from concerns about preserving biodiversity, including troops of chimpanzees and elephants affected by the project, communities near the mine have complained about polluted water. Rio acknowledges the problem but says it is taking steps to prevent it.If Simandou becomes unpopular, it would be relatively easy for disaffected people to block a section of the 650km railway, threatening exports. That could happen as a result of dwindling job opportunities, perceptions that ordinary people are not benefiting from Simandou, or environmental aggravations.Still, few in Guinea are talking about the risks. For ordinary people and government ministers alike, the project offers a unique opportunity to catapult the country on a development path.Sidiki Koné, a Rio geologist who was part of the original team that surveyed Simandou back in the 1990s, is elated that the project he helped start nearly 30 years ago has finally come good. “Everybody expects the future to be better,” he says..© 2025 The Financial Times Ltd.

Miningweb: FT - How the world’s biggest mining project, in Guinea, is a win for China

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