Guinea's untapped iron ore riches are back in the spotlight

[LONDON] Guinea sits on some of the richest iron ore deposits in the world, but they've been more of a curse than a blessing to the mining industry.

That might be about to change as the government ends a seven-year-old dispute with billionaire Beny Steinmetz over the Simandou iron ore project. At the same time, mining veteran Mick Davis is starting a new development that could be the precursor to projects exploiting Guinea's great mineral wealth.

The country's deposits have been left untouched after more than a decade of political infighting, corporate squabbles, an Ebola outbreak and a crash in iron ore prices. The biggest iron ore companies have explored developing Guinea at some stage, but left the country empty-handed and some faced allegations of corruption.

Still, Simandou remains the crown jewel of Guinea's assets. If developed, the mine would transform the dynamics of the iron ore market. That's a big if and many say Simandou will never happen given China's maturing economy and slowing demand for iron ore and steel.

The deposit could be capable of producing about 150 million tons of iron ore a year, which would catapult the West African country into the top ranks. The iron ore is also some of the highest quality, making it a sought-after product, especially for steelmakers as China pursues a clean skies policy.

Building Simandou would take a huge investment. It could cost an estimated US$20 billion, largely because Guinea has insisted on the construction of a 650-kilometer (400-mile) railway to export iron ore from a local port. That means about two-thirds of the money would be spent on infrastructure.

For years, companies looking to develop Guinea's iron ore mines have talked about a southern solution. Instead of the trans-Guinean rail, export could flow across the border into Liberia and use an existing rail line that runs to the Liberian port of Buchanan. ArcelorMittal, which currently operates the line, said it would let other companies use it, assuming there's spare capacity or they pay for upgrades.

In the past, smaller projects closer to the southern border won permission to export through Liberia, though none of them were actually developed.

Should Davis succeed in Guinea where all his predecessors have failed, it would mark a huge comeback for the executive after losing the top job at Glencore Plc following the Xstrata Plc merger. It would also hand a win to Guinean President Alpha Conde that he was finally getting the country's iron ore industry up and running.

BLOOMBERG