Rio Tinto Shares Edged 1.32% Lower on Simandou Project Update

The Rio Tinto plc (LON: RIO) share price edged 1.32% lower after announcing it had achieved a critical milestone in developing Guinea's Simandou iron ore project. The company had completed crucial agreements with the Winning Consortium Simandou (WCS) and the Republic of Guinea about the project. 

The agreements revolve around constructing the trans-Guinean infrastructure for the Simandou iron ore project, which is regarded as a world-class resource given that it is the world's largest known undeveloped supply of high-grade, low-impurity iron ore.

Rio Tinto’s Simfer joint venture reached the above agreements with the government and WCS, which still have to be ratified by the state to come into effect. The agreements are for constructing over 600 kilometres of new multi-use rail and port facilities. 

The rail network and port facilities will export iron ore from the Simandou mining concessions in Guinea’s southeast. Investors barely reacted to the news, indicating their lack of interest in the project, which is still in its early stages. The instability witnessed in West Africa could also have contributed to the muted reaction. 

The infrastructure capacity and associated costs will be shared equally between WCS, which is developing blocks 1 and 2 and Simfer, which is developing blocks 3 and 4 of the Simandou project. 

Rio Tinto also noted that China Baowu Steel Group could participate in the project since it has signed a term sheet agreement with WCS that may see it partner in the WCS scope for blocks 1 and 2 of the Simandou mining concession and the infrastructure joint venture.

The agreements are still subject to several conditions, including Guinea’s approval of the project’s final feasibility study.

Rio Tinto Executive Committee lead for Guinea, Bold Baatar, said: “With these agreements, we have reached an important milestone towards full sanction of the Simandou project, bringing together the complementary strengths and expertise of Rio Tinto and our partners, the Government of Guinea and Winning Consortium Simandou, for the infrastructure that will unlock this world-class resource. Simandou, the world's largest known undeveloped supply of high-grade, low-impurity iron ore, will strengthen Rio Tinto's portfolio by complementing our existing Pilbara and Iron Ore Company of Canada products.”

Rio Tinto share price. 

The Rio Tinto share price edged 1.32% lower to trade at 4725.5p, from Thursday’s closing price of 4788.8p.