BEYLA, Guinea, Aug 5 (Reuters) – In a remote, southeastern corner of Guinea, the mist-shrouded Simandou mountain range rises above the lush forest. Buried under its green slopes lies some of the planet’s finest iron ore, a treasure long coveted by the world’s mining giants.
But any profit, for Guinea or the firms, will remain locked in the russet ground until an export outlet to the coast is cleared, a task that will involve building 650 kilometres (400 miles) of railway, 35 bridges, and 24 km of tunnels.
Coupled with the need for a new port to load the ore onto ships, the initial price tag would be around $20 billion, making it Africa’s biggest mining project ever, to be carried out in one of the continent’s most unstable and rundown nations.
“The logistical challenge is such that the whole project remains on hold until the infrastructure can be put in place to get the ore out,” said Madani Dia, a Guinean mining analyst.
Lack of adequate infrastructure – ports, roads and railways – to expand the trade and export of Africa’s mineral riches is one of the biggest brakes on the continent’s faster growth.
Global firms including Rio Tinto and Brazil’s Vale have for years been eying Simandou, and most recently miner and commodity trader Glencore has expressed interest in Guinea’s iron ore, a presentation obtained by Reuters shows.
Yet a mixture of political instability, protracted rows over rights and the eye-watering price tag for the overall project have meant actual production still remains a distant prospect.
A complex legal battle is playing out over the northern half of the huge deposit, with an Israeli billionaire, Vale, Rio Tinto and Guinea’s own government all battling to defend their positions after President Alpha Conde’s government revoked rights to the two northern concession blocks this year.
Few doubt Simandou’s huge potential. “Guinea’s current GDP is around $6.8 billion. To develop Simandou, up to $20 billion must be spent over the next five years, so the potential impact on the national economy is absolutely enormous,” said Tom Wilson, head of intelligence and analysis at consultancy Africa Practice.
But the risks are of similar proportions.
“It’s suicidal to invest in Simandou,” said a senior mining company executive who asked not to be named. He said that on top of the infrastructure challenge, Guinea’s volatile politics and business climate made it a big gamble.
“God knows how many times the government might change the mining code etc. … It’s a very high-risk investment in a country where laws and rules are not stable,” the executive said. Since February, Guinea has also been fighting an outbreak of the deadly Ebola virus, which has killed more than 350 people there.
Complicating any investment proposal, Guinea also insists Simandou’s ore must be shipped from its own coast, rather than taking a shorter route via neighbouring Liberia.
In a sign of some progress after years of discussions and delays, Rio Tinto and partner Chinalco, the firms who control the southern two of Simandou’s four blocs, signed a deal with Guinea’s government in May outlining investment plans.
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