China wins right to develop African Pilbara killer

Via the FT:

A Chinese-backed joint venture has secured the rights to develop Simandou, one of the world’s biggest untapped deposits of steelmaking ingredient iron ore.

The award to the SMB-Winning consortium, whose investors include Chinese aluminium producer Shandong Weiqiao and the Yantaï Port Group, brings the development of a mine a step closer.

Simandou is estimated to contain 2bn tonnes of iron ore and is one of the great prizes in mining. Over the past decade the deposit has attracted interest from billionaires and major miners but development has been stymied by legal rows and concerns about costs.

As part of its successful bid, SMB-Winning said it would build a 650km railway and a deepwater port on the Guinean coast to transport the ore out of the country and to key markets including China, the world’s biggest consumer of iron ore.

Simndou can produce 100mt of very high quality iron ore at $20 cash cost. It is a monster. The problem is the all-in cost of $20bn to build the infrastructure.

No private operator has been able make that stack up and various interests have been mired in scandals as well. Shandong Weiqiao is part of the giant China Hongqiao SOE so perhaps public money can get the thing moving.

We’d better hope not. It is giant Pilbara killer.

David Llewellyn-Smith
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