Rio Tinto's (OTCPK: RTNTF) board has approved Guinea's Simandou iron ore project, marking it the world's largest mining endeavor. CEO Jakob Stausholm confirmed the news about the $20 billion project.
"The board yesterday sanctioned the biggest mining project in the world," Stausholm told the Financial Times, expressing confidence about regulatory approval but noted that they are still awaiting the decision from their state-owned Chinese partners.
Rio Tinto aims to start high-grade iron ore production as early as 2025 in collaboration with multiple partners, including the Guinean government and at least seven other companies, five from China. The $20 billion project is anticipated to contribute approximately 5% to global seaborne supply upon its completion and create around 45,000 jobs.
The complexity of the Simandou project arises from its intricate ownership structure, prolonged negotiations, legal disputes, and the ever-changing political landscape in Guinea. Rio Tinto holds two of the four Simandou mining blocks in a joint venture with China's Chalco Iron Ore Holdings (CIOH) and the Guinean government.
Steelmaking with high-grade iron ore allows using hydrogen and carbon monoxide instead of coal-based fuel like coke, making the process more environmentally friendly. As steelmaking creates about 8% of global emissions, the decarbonization of this industry is significant.
Rio Tinto has already invested $11.6 billion in the Simandou project, with the funds allocated for critical path works, infrastructure development, and various project components. The company plans to invest an additional $6.2 billion in the mine, rail, and port projects in the Republic of Guinea.
"Early November I was out there. I flew over the rail line, the mines and the port in a helicopter, it is amazing what has happened," Stausholm told FT, clarifying that the tunnels along the rail corridor had already been prepared.
Furthermore, Baowu, one of the Chinese state-owned partners, recently raised $1.4 billion through a bond issue to finance the construction of a 552-kilometer rail line, a critical component of the infrastructure needed to transport high-grade iron ore from the Simandou mountains to a new deepwater port on Guinea's Atlantic coast.
In addition to the Simandou project, Rio Tinto is actively pursuing the expansion of its Oyu Tolgoi underground copper mine in Mongolia, aiming to produce 500,000 tons of copper annually starting in 2028.
Despite commodity market turbulence, Stausholm is optimistic about the demand outlook improving for copper and aluminum, and China's need for iron ore is still going strong. He also noted that the company is not giving up on the Jadar lithium project in Serbia, which has had its license revoked following environmental protests.
It goes without saying, you both need government approval, and you need to have a social license in terms of community acceptance," he said.