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China-backed group wins US$14b Guinea iron ore deal

It pipped Australia's Fortescue to develop blocks 1 and 2 of the largest known deposit of its kind, holding more than 2b tonnes of high-grade ore, and build the rail infrastructure

Conakry, Guinea

A CONSORTIUM representing Chinese, French and Singaporean interests won a US$14 billion tender to develop part of Guinea's Simandou iron ore project, sources familiar with the talks told Reuters, edging out Australia's Fortescue Metals Group.

The consortium - which includes Société Minière de Boké (SMB) and Singapore's Winning Shipping as well as Guinean government interests - has committed to develop blocks 1 and 2 of the largest known deposit of its kind, holding more than two 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 and the high costs have curbed interest.

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The government required bidders to build a 650km railway and deepwater port to transport the ore from the remote south-eastern corner of Guinea to the coast for export, deterring some miners from bidding.

SMB-Winning put US$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 on Wednesday confirmed the figure.

"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, the consortium's chief executive.

Fortescue had offered US$9 billion for the blocks but did not formally promise to build the railway dubbed the "Transguinéen", two government sources said on Wednesday.

Transguinéen was pivotal in the decision to grant the blocks to SMB-Winning, mines minister Abdoulaye Magassouba told Reuters.

On Thursday, Fortescue confirmed in a statement that it had lost the bid.

The Australian company said it will focus on its US$3.88 billion investment in the Eliwana and Iron Bridge projects in the Pilbara area of north-western Australia. Pilbara is a key area for miners of the steel-making material.

Eric Humphery-Smith, senior Africa analyst at consultancy Verisk Maplecroft, said the outcome was 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," he said.

Investors in the relatively little-known winning consortium include Chinese aluminium producer Shandong Weiqiao, a unit of China Hongqiao and Yantai Port Group , as well as Guinea's government.

The consortium is Guinea's leading exporter of bauxite, an aluminium ore.

Mr 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. REUTERS