Rio Tinto (RIO) has quietly killed off the long mooted $US20 billion Simandou iron ore project in Guinea in west Africa.
The news was slipped out in an interview the mining giant’s new CEO, Jean-Sebastien Jacques, did with The Times in London overnight.
The new CEO has been on a major media briefing campaign after taking over the reins of the world’s second biggest mining group on the weekend.
Rio last month submitted a feasibility study to the Guinean government.That was despite writing down the value of the project by $US1.1 million in the company’s 2015 results in February.
Mr Jacques didn’t surprise anyone when he told the tImes that the global oversupply of iron ore made the project inviable at this time. As well the $US20 billion cost is clearly too little for such a large project in such difficult terrain and conditions.
The Simandou is complex and costly – it involves a huge iron ore mine in central Guinea, a 650-kilometre railway and a deepwater port on the West African country’s Atlantic coast.
At full production, Rio said the project would generate about $US7.5 billion in revenue, according to a 2014 report, and add $US5.6 billion to Guinea’s gross domestic product, doubling the size of its economy.
But that was with global iron ore prices more than double the current level of around $US55 a tonne.
Simandou contains more than 2-billion tonnes of high-grade iron ore reserves. That is no longer as valuable as they were in the past, hence the decision to abandon it.
Rio continues to improve and slowly expand its productive capacity in its WA iron ore mines in The Pilbara.
