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LONDON (Reuters) – Rio Tinto (NYSE:RIO) has been solely funding preparatory work at the blocks it holds at Simandou, one of the world’s largest untapped iron ore deposits, as its Chinese partners are yet to make their funds available, two sources close to the matter said.
The Anglo-Australian miner owns two of four Simandou mining blocks as part of its Simfer joint venture with China’s Chalco Iron Ore Holdings (CIOH) and the government of Guinea, where the mine is located.
It has so far spent more than $500 million on developing the project that should have been split with CIOH, due to a delay in the Chinese consortium getting state approval on the financing, the sources said.
CIOH is 75% held by Aluminum Corporation of China (Chinalco) and 20% by Baowu Steel Group, with China Railway Construction Corporation (CRCC) and China Harbour Engineering Company (CHEC) each holding 2.5%.
“The worry is that if their (Rio’s) partners don’t get approval from China on their funding, the money will deplete,” added one of the sources, who declined to be named because the information is not public.
Rio declined to comment. Chinalco, Baowu, CRCC and CHEC did not respond to Reuters’ requests for comment.
Most Chinese companies are backed or owned by state entities, their financial approvals complicated by convoluted structures amid an economic slowdown that has seen the world’s second-largest economy struggle after a brief post-COVID recovery.
With a complex ownership structure, Simandou has been haggled over for years, its construction delayed by legal wrangling, Guinea’s political changes and the difficulty and cost of the 600 km of rail and port that need to be built to export the ore from the mines in the southeast of the country.
Raphael Gnambalamou, a director-general at Guinea’s mines ministry said that “the project is moving well”.
Simandou’s other two blocks are owned by the Winning Consortium Simandou (WCS), made up of Singapore-based Winning International Group, Weiqiao Aluminium – part of the China Hongqiao Group – and United Mining Suppliers.
A WCS spokesperson said in an email that the consortium had been “steadfastly progressing with our construction work” on Simandou blocks 1 and 2 and associated infrastructure development, with a workforce of more than 10,000.
Simfer and its contractors have employed around 3,000 people so far, after agreeing to share capacity and associated costs for the trans-Guinean rail line of the project with WCS.
Rio earmarked $800 million for its share of the development in 2023 and around $2 billion a year in 2024 and 2025.
