The Société Minière de Boké – Winning consortium offered $14 billion to win a tender to develop part of Guinea’s Simandou iron ore project, edging out Australia’s Fortescue, sources familiar with the talks told Reuters.
The consortium – representing Chinese, French, Singaporean and Guinean interests – has committed to developing blocks 1 and 2 of the largest known deposit of its kind, holding more than 2 billion tonnes of high-grade ore.
Guinea has sought to develop the Simandou deposit for decades, but the project has been mired in protracted legal disputes while the high costs have curbed interest.
The government required bidders to build a 650 km railway and deepwater port to transport the ore from the remote southeastern corner of Guinea to the coast for export, deterring some miners from bidding.
SMB-Winning put $14 billion on the table to develop the blocks and build the infrastructure, according to a government source who asked not to be named because they are not authorised to speak on behalf of the mining ministry.
SMB-Winning chairman Fadi Wazni confirmed that figure.
Fortescue had offered $9 billion for the blocks but did not formally promise to build the railway dubbed the “Transguinéen”, two government sources said.
Fortescue was not immediately available for comment outside Australian working hours. Simandou would have been its first venture in Africa.
The issue of the Transguinéen was pivotal in the decision to grant the blocks to SMB-Winning, mines minister Abdoulaye Magassouba told Reuters.
Investors in the relatively little-known SMB-Winning consortium include Chinese aluminium producer Shandong Weiqiao – a subsidiary of China Hongqiao, the Yantaï Port Group, and Guinea’s government.
The consortium is Guinea’s leading exporter of bauxite, an aluminium ore.
Eric Humphery-Smith, senior Africa analyst at consultancy Verisk Maplecroft, said: “This outcome is hardly surprising, it was clear from the beginning that SMB was more likely to commit seriously to the Trans-Guinean railway than Fortescue – a deal-breaker for this project.”
Magassouba said the government would now hash out the technical details of the deal with SMB-Winning and put the resulting agreement to a vote in parliament.
SMB-Winning aims to bring the deposit to production within five years of the agreement being ratified.
“The Simandou Project will be crucial for Guinea’s future. This mega deposit is an opportunity in terms of employment and wealth creation for the whole country,” said Sun Xiushun, CEO of the consortium.
The two blocks became available after a settlement in February between Guinea’s government and Israeli billionaire Beny Steinmetz’s BSG Resources following a protracted legal dispute.
Blocks 3 and 4 of the mine are owned by a joint venture of Rio Tinto, China Aluminium Corp (Chinalco), and the government.