Rio Tinto, one of the world’s largest mining companies, is ready to start its ambitious Simandou project in West Africa, after nearly three decades of delays and challenges. The project, which involves extracting high-grade iron ore from the Simandou mountains in Guinea, is expected to have a significant impact on the global steel industry, as it could help reduce its carbon footprint and meet the growing demand for greener steel products.
Iron ore is a key ingredient in steelmaking, and the quality of the ore determines how much energy and emissions are required to produce steel. The ore that Rio Tinto plans to mine from Simandou has an average iron content of more than 65%, which is among the highest in the world. This means that it can be used to make steel with less coal and coke, which are the main sources of carbon dioxide emissions in the steel industry.
According to Rio Tinto’s head of copper, Bold Baatar, Simandou’s ore is also suitable for direct reduction iron, a process that uses natural gas or hydrogen instead of coal to remove oxygen from the ore. This process could further lower the emissions from steelmaking, especially if green hydrogen, which is produced from renewable energy sources, is used.
“The fundamental shift in the last number of years has been that the world is far more in agreement on climate change,” Baatar told the Financial Times in an interview. “The only way the steelmaking industry globally decarbonizes is if China decarbonizes.”
China is the world’s largest producer and consumer of steel, accounting for more than half of the global output and demand. It is also the largest importer of iron ore, mainly from Australia and Brazil. However, China’s relations with these countries have been strained in recent years, due to trade disputes and political tensions. This has prompted China to look for alternative sources of iron ore, and Simandou could be one of them.
Rio Tinto’s Simandou project is a partnership with the Guinean government and at least seven other companies, including five from China. The project will involve building two mines, a 552-kilometer railway, and a deep-water port, with a total investment of $20 billion. The project is expected to start this year, once Rio Tinto’s Chinese partners receive the final approval from Beijing, and to reach full production of 120 million tonnes per year by 2027.
Simandou’s production will add around 5% to the global seaborne supply of iron ore and could put pressure on the prices of the commodity, which have soared to record highs in the past year, due to strong demand and supply disruptions. Simandou’s ore could also challenge the dominance of the low-grade ore from Australia and Brazil, which currently accounts for more than 80% of the global seaborne trade.
However, Simandou’s development is not without risks and uncertainties. The project has faced several legal, financial, and political hurdles since Rio Tinto secured an exploration license for Simandou in 1997. The project has also been marred by allegations of corruption and bribery, which led to the loss of half of Rio Tinto’s original concession in 2008. The project’s location in a remote and mountainous region poses logistical and environmental challenges, as well as security threats from armed groups and local communities.
Despite these challenges, Rio Tinto and its partners are confident that Simandou will be a game-changer for the global steel industry, as well as for the economic and social development of Guinea and West Africa. Simandou is expected to create thousands of jobs, generate billions of dollars in revenues and taxes, and support the diversification and industrialization of the region.
Simandou is also seen as a model for a “new era of co-development” that will be necessary to source the vast volumes of metal required to build the green economy of the future, according to Baatar. He said that the project’s complex partnership structure, which involves multiple stakeholders from different countries and sectors, could provide a template for other large-scale mining projects around the world.
“There is nothing else out there of this scale and size,” he said.
Source: Seeking Alpha
