Guinea's Simandou Iron Ore Project Starts Production, Chinese Enterprises Play a Key Role

(Yicai) November 12 - The Simandou Iron Ore Project in Guinea has officially started production. This project is the world's largest undeveloped iron ore deposit. Several Chinese enterprises, including China Baowu Steel Group and China Aluminum Company (Chalco), have played an important role in this project. This development may shake up the global iron ore market structure.

The Simandou Iron Ore Project has an investment of more than 20 billion US dollars, and its start-up ceremony was held yesterday. The mine is divided into two parts, with proven iron ore reserves of 4.4 billion tons, with an average grade of over 65%. After the full operation of the Simandou mine, the annual production capacity will reach 120 million tons.

The Simandou mine was discovered by Rio Tinto, an Anglo-Australian mining giant, in 1997. However, due to various challenges, the mine has been basically idle for nearly 30 years. It was only last year, with the assistance of partners, that the London-based company finally announced that the mine had met all the necessary development conditions and was expected to start production this year.

The Simandou project is jointly developed by the Guinean government, the Simandou Consortium (WCS), and SimFer. The Simandou Consortium is responsible for the exploitation of Block 1 and Block 2. This consortium is held by a consortium led by Singapore shipping giant Win International Group, holding 51% of the shares, while the remaining 49% are held by Baowu Resources, a subsidiary of China's steel giant Baowu Group.

SimFer is responsible for the exploitation of Blocks 3 and 4. Rio Tinto holds 53% of the shares in SimFer, while the rest are held by China Aluminum Iron Ore Holding Co., Ltd., which has many shareholders. Beijing-based China Aluminum holds 75% of the equity in China Aluminum Iron Ore, Baowu Resources holds 20%, and China Railway Construction Corporation and China Harbour Engineering Co., Ltd. each hold 2.5% of the shares.

Major Turning Point

Hu Wangming, Chairman of Shanghai Baowu Resources Co., Ltd., said at the ceremony that the successful start-up of the Simandou Iron Ore Project marks an important milestone in the history of global mining. After the full operation of the project, it will lay a solid green energy foundation for the development of the steel industry in China and around the world.

China imports more than 100 million tons of iron ore every year. Gao Xin, Deputy Director of the Research Center of Langgang Steel Network, told Yicai that although the initial output of the Simandou Iron Ore Project may have limited impact on the iron ore market, it may put pressure on other mining companies and enhance the bargaining power of Chinese enterprises.

Looking ahead, Mr. Gao said that as the Simandou Iron Ore Project increases production and the shareholding ratio of Chinese enterprises in the mine increases, the supply and demand balance of iron ore may change, which may lead to a major turning point in the iron ore market next year.

China's steel demand is slowly declining, while global mines are still expanding. This means that iron ore prices may continue to fall. Mr. Gao added that next year, iron ore prices may drop from above $100 per ton to between $80 and $90 per ton.

Sources: yicaiglobal

Original: www.toutiao.com/article/1848638110197767/

Statement: The article represents the views of the author himself