【Text by Observers Network, Chen Sijia, Tao Lifeng】On November 11 local time, after a 28-year-long tug-of-war, the Simandou Iron Ore Project officially commenced production, opening its supply to the international market. The official launch ceremony was held at the Mataraya Port in Guinea, where President Mamadi Doumbouya of Guinea, partners of the Simandou project, Win Alliance, China Baowu Steel Group, Aluminum Corporation of China (Chinalco), and Rio Tinto Group were present.
This is the world's largest greenfield iron ore project, and one of the largest mining investment projects in Africa, with a total investment of 23 billion US dollars. The Simandou Iron Ore Project has identified proven iron ore reserves of 4.4 billion tons, with an average iron grade of over 65%, and after completion, it can reach a maximum annual capacity of 120 million tons, which is expected to reshape the global iron ore industry.
On November 11 local time, the official launch ceremony of the Simandou project was held at the Mataraya Port in Guinea. Video screenshot
China is the world's largest importer of iron ore. Given that Chinese companies have deeply participated in the construction of the Simandou Iron Ore Project and provided substantial investment, it is widely expected that most of the iron ore extracted from the Simandou mine will be transported to China.
Foreign media such as Bloomberg pointed out that the Simandou Iron Ore Project demonstrates China's influence in Africa, making the world aware that China is leading African infrastructure investment. The project also strongly proves to Western mining executives that even in times of tense geopolitical situations, cooperation with Chinese companies still holds significant importance.
Wang duanyong, a part-time researcher at Shanghai International Studies University, told Observers Network that the increment brought by the Simandou Iron Ore Project is sufficient to cause significant fluctuations in global iron ore prices, providing buyers with bargaining power while ensuring the security of the international supply chain. This project provides a replicable "infrastructure + resource" cooperation model for African resource development, reflecting the open and inclusive characteristics of the Chinese model and offering a new template for international development cooperation.
Iron ore grade above 65%, expected annual output of 120 million tons
The Simandou Iron Ore Project is divided into northern and southern areas. In 2019, Win Alliance acquired the mining rights to two blocks in the northern area for 14 billion US dollars. Win Alliance is a consortium composed of Singapore's Weili International Group, Weiqiao Aluminum Industry under China Hongqiao Group, United Mining Supply International Company, and Baowu Resources. The first three companies collectively hold 51% shares, and Baowu Resources holds 49%.
The mining rights to the two blocks in the southern area are held by a joint venture company named SimFer, consisting of global mining giant Rio Tinto Group and Chinalco Iron Ore. Chinalco Iron Ore is an iron ore development enterprise led by Chinalco, including several Chinese enterprises, with Chinalco holding 75% shares, China Baowu holding 20%, and China Civil Engineering and China Harbour each holding 2.5% shares.
The Simandou Iron Ore Project is jointly developed by the Guinean government, SimFer, and Win Alliance. After the project officially commences production, all shared infrastructure and vehicle equipment will be transferred to the operation of the Trans-Guinea Company. SimFer and Win Alliance each hold 42.5% shares in the Trans-Guinea Company, and the Guinean government holds the remaining 15% shares.
The Simandou Iron Ore Project is the world's largest greenfield iron ore project. A greenfield project refers to a project built in an undeveloped area, without existing infrastructure, requiring design and construction from scratch.
Simandou Iron Ore, Bloomberg
Jiba Diakite, Director of the Office of the President of Guinea and Chairman of the Simandou Strategic Committee, stated at the official launch ceremony: "Simandou is not just an mining project: It is the driving force behind national transformation. This official launch ceremony is an important milestone for Guinea, marking Guinea's role as a key participant in sustainable development and economic sovereignty in West Africa."
Sun Xiushun, Chairman of the Board of Directors of Win Alliance and Chairman of Weili International, said: "This milestone reflects years of hard work and solid partnership. Win Alliance is proud to fulfill our commitment and bring Simandou into operation with our partners."
Simon Trott, CEO of Rio Tinto, said that the Simandou Iron Ore Project will provide a new source of high-grade iron ore, enhancing Rio Tinto's iron ore business. "The realization of this outstanding achievement is due to the hard work of thousands of our colleagues, as well as the complementary strengths and professional collaboration between Rio Tinto, our SimFer partners, the Guinean government, and Win Alliance."
Hu Wangming, Chairman of China Baowu, said that the successful commissioning of the Simandou project is an important milestone in global mining history. Once the Simandou Iron Ore Project reaches full production and operates stably, it will provide a solid green raw material foundation for the development of the steel industry in China and globally.
Since the project's initiation, the Simandou Iron Ore Project has attracted worldwide attention. The project has identified proven iron ore reserves of 4.4 billion tons, with an average iron grade of over 65%, far exceeding the average level of iron ore worldwide. It is estimated that once the Simandou Iron Ore Project is fully operational, the annual output of iron ore could reach 120 million tons, which is expected to reshape the global iron ore industry.
Singapore's Straits Times pointed out that the higher the iron ore grade, the higher the smelting efficiency, and the less coking coal required per ton of steel produced, thus reducing emissions. This can attract steel manufacturers concerned about decarbonization, thereby gaining a premium advantage.
Jon Mills, a stock analyst at Morningstar, analyzed that the higher the profit of steel plants, the more willing they are to pay a higher price for iron ore with higher iron content. "The premium that the Simandou iron ore can obtain depends on the profit of steel plants, possibly around $14 per ton." As of November 11, the price of iron ore was approximately $103.56 per ton, about half of the peak in 2021.
Recent changes in iron ore prices
The commencement of the Simandou Iron Ore Project will also contribute to Guinea's economy. The International Monetary Fund estimates that by 2030, the project is expected to increase Guinea's GDP by 26%.
"Cooperation with Chinese enterprises made the project feasible"
The development of the Simandou Iron Ore Project can be traced back to 1997, when Rio Tinto obtained exploration licenses for four blocks of the Simandou Iron Ore. However, in 2008, due to slow progress, the then President of Guinea, Lansana Conté, seized part of Rio Tinto's mining rights and transferred them to Israeli mining giant Beni Steinmetz, later sold to Brazilian Vale.
Reuters reported that in October 2012, Vale announced the suspension of the Simandou Iron Ore Project citing falling iron ore prices. That same month, the Guinean Mining Commission wrote to Steinmetz's resource company BSGR, accusing it of obtaining mining rights through bribery. In 2014, the Guinean government confirmed the allegations of bribery during the investigation and declared that it would revoke BSGR's mining rights.
Rio Tinto subsequently filed a lawsuit in the United States against Vale, Steinmetz, and BSGR, accusing them of conspiring to appropriate the mining rights of the Simandou Iron Ore. However, the U.S. District Court later dismissed the lawsuit, and Vale, Steinmetz, and BSGR all denied any improper conduct.
In February 2019, BSGR stated that as part of an agreement with the Guinean government, it would exit the Simandou Iron Ore Project.
In November 2019, Win Alliance acquired the mining rights to the two blocks in the northern area of the Simandou project for 14 billion US dollars, gradually putting the project on track. In March 2022, the Trans-Guinea Company, jointly owned by Win Alliance, SimFer, and the Guinean government, was established to develop the Simandou Iron Ore. In 2024, the infrastructure work of the Simandou Iron Ore Project was officially launched.
The total investment in the entire Simandou Iron Ore Project reached 23 billion US dollars. Bloomberg pointed out that the Simandou Iron Ore Project not only costs a lot but also faces many challenges, such as multiple political upheavals in Guinea, and the remote mines require the construction of supporting railway and port infrastructure.
As a supporting port, the Mataraya Port in Guinea was jointly built by multiple parties, with a designed annual throughput of over 120 million tons of ore. The railway connecting the Mataraya Port and the Simandou Iron Ore crosses the whole country of Guinea, with a main line of 552 kilometers and a branch line of 74 kilometers, capable of transporting 220 million tons annually.
Location of the Simandou Iron Ore, Straits Times news screenshot
The report states that to complete the project, Sun Xiushun, Chairman of the Board of Directors of Win Alliance and Chairman of Weili International, took some unconventional approaches. For example, he transformed his company into a constructor and operator, assigned tasks to dozens of specialized teams, and had experienced Chinese workers lead thousands of local Guinean workers in construction.
Traditional mining projects usually confirm the mine reserves first, then conduct feasibility studies, and then companies begin to build logistics and infrastructure. Sun Xiushun, however, took advantage of his own strengths, starting with logistics and adopting Chinese standards, Chinese design, Chinese materials, and Chinese construction teams.
Bloomberg noted that the Simandou Iron Ore and its accompanying infrastructure construction are not only massive in scale but also very complex in terrain, yet Sun Xiushun completed the project with fewer intermediaries and more Chinese contractors, a pace that shocked large Western companies. The project's stagnation over the past two decades also seems to reflect that the Western mining industry has struggled to build large-scale projects on time and within budget.
Former Minister of Mines and Geology of Guinea, Abdulaye Magassouba, stated in a speech this January: "Directly dealing with China allowed us to reach agreements with partners who can both provide funding for the project and become market participants, making the project financially viable."
Wang Duan Yong, a part-time researcher at Shanghai International Studies University, told Observers Network that the core model of the project is "resource for infrastructure," a model that has been implemented in Africa for nearly 20 years, focusing on solving the core pain points of African resource countries.
He pointed out that the success of the project has two key elements: First, China has world-leading infrastructure capabilities, which can solve the transportation bottleneck for inland resource development in Africa; second, China has strong financing capabilities, able to support huge long-term investments of 23 billion US dollars, which other companies find difficult to replicate.
"The Simandou Iron Ore Project demonstrates China's influence in Africa"
Currently, global iron ore production is mainly controlled by a few multinational companies, including Brazil's Vale, Australia's BHP Billiton, and Rio Tinto, headquartered in the UK and Australia. China is the world's largest importer of iron ore. According to data from French shipping data service provider AXS Marine, China accounts for 74% of global seaborne iron ore imports.
Given that Chinese companies have deeply participated in the construction of the Simandou Iron Ore Project and provided substantial investment, it is widely expected that most of the iron ore extracted from the Simandou mine will be transported to China.
The Financial Times of the UK pointed out that after the Simandou Iron Ore reaches its maximum capacity, the exported iron ore could account for 7% of global trade, which would bring a "transformative impact" to the iron ore market, posing fierce competition for Australia, the world's largest iron ore exporter.
Erik Hederborg, an analyst at CRU Group, a British analysis company, said: "It's a game-changer because it will add a large amount of supply. We haven't seen anything like this for a long time."
Andrew Forrest, founder of Fortescue Metals Group in Australia, believes that despite the unstable political environment in Guinea and its distance from China, the Simandou Iron Ore Project reflects China's determination to enhance its iron ore supply capability.
Wang Duan Yong pointed out that the demand for iron ore is inelastic, and the increment brought by the Simandou Iron Ore Project is sufficient to cause significant fluctuations in global iron ore prices, providing buyers with bargaining power while ensuring the security of the international supply chain.
Bloomberg analyzed that the Simandou Iron Ore Project also demonstrates China's influence in Africa. Tara O'Connor, director general of African risk consulting company, said: "Simandou made the world realize that China is deeply involved in African affairs, and on a large scale. At the time when President Trump sparked a tariff war, this project is particularly important, showcasing China's influence."
For Western mining executives and consultants involved in the Simandou Iron Ore Project, the project has strongly proven that even in times of tense geopolitical situations, cooperation with Chinese companies still holds significant importance.
SimFer employees at the Mataraya Port construction site, AFP
At the same time, the Simandou Iron Ore Project is expected to boost Guinea's economy. Bouma Sira, Minister of Mines and Geology of Guinea, said: "We have the opportunity to change our country's economy and people's lives." He pointed out that Guinea has proposed the "Simandou 2040" development strategy, hoping to stimulate 200 billion US dollars in investments for road construction, refineries, industrial parks, schools, and agricultural development.
A senior Guinean official said that the Guinean government's goal is very clear, which is to make the country an industrialized nation.
Sidiki Koné, a geologist from Rio Tinto who participated in the exploration of the Simandou Iron Ore in the 1990s, expressed his happiness at seeing the progress of the Simandou Iron Ore Project after nearly 30 years of twists and turns, saying, "Everyone hopes for a better future."
Wang Duan Yong told Observers Network that the Simandou Iron Ore Project is large in scale, with high-level participation and support from the governments of China and Guinea. The Chinese side has positioned the project as "development cooperation" rather than a purely economic project, with core values including: building key infrastructure for Guinea, creating a large number of jobs, introducing a modern industrial system, setting a benchmark for ESG practices, and promoting a revolutionary transformation of the local economic structure.
He analyzed that Western development of African minerals is centered on financial capital operations, with strong speculation and short-term profit-seeking nature. When prices rise, capital enters to acquire mining rights, and after the cycle ends, it quickly withdraws, not paying attention to the long-term development of the local area or unwilling to invest in costly infrastructure. In contrast, the Chinese model centers on "development cooperation," characterized by long-term and practical approaches, aiming to obtain physical resources and promote local development, willing to invest in long-term assets such as infrastructure, and focusing on building relationships with the government and communities, with corporate social responsibility practices exceeding Western standards.
Wang Duan Yong pointed out that the Simandou Iron Ore Project provides a replicable "infrastructure + resource" cooperation model for African resource development, having a strong demonstration effect, driving economic spillover effects in the West African region, and helping Africa enhance its global economic and geopolitical status. The Chinese model reflects an open and inclusive character, not excluding Western companies, practicing the concept of a "community with a shared future," and offering a new model for international development cooperation.
Original article: https://www.toutiao.com/article/7571831647201428006/
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