<div id="readability-page-1">The launch of Guinea’s US$20 billion Simandou iron ore project marks a globally significant milestone.\nThe event on Tuesday at Guinea’s Morebaya port, attended by Chinese and regional African leaders, saw the departure of the first shipment of ore from the Simandou project – a major feat after nearly three decades of development.\nThe Chinese delegation was led by Vice-Premier Liu Guozhong, who underscored the importance Beijing has attached to securing high-grade ore for decarbonising the national steel industry and diversifying away from Australian supplies.\nGuinea’s Simandou 2040 plan aims to use mining revenues to develop infrastructure, agriculture and education in the West African country, while also signalling the mine’s immediate global importance.\nMost extracts from Simandou – the world’s largest known untapped deposit of high-grade iron ore – are expected to be shipped to China, given the heavy investments by Chinese firms in the project. But the majority Chinese stake is a key concern for both the Guinea government and British-Australian mining giant Rio Tinto regarding future market stability, which has created an unusual alliance.\nGuinean officials are aware of the possibility that Chinese firms would use the massive influx of high-grade ore to suppress global iron ore prices, but have pledged to actively collaborate with Rio Tinto to leverage the mine’s premium product and Rio Tinto’s market expertise to maintain stable high prices for the ore.\nThe Guinean minister of mines and geology, Bouna Sylla, said the country was monitoring the formation of China Mineral Resources Group (CMRG), which aims to centralise Chinese iron ore imports.\n“We are closely following that development because it tells how we must engage in informal discussions with Rio Tinto about how we can work together to maintain a high iron ore price,” said Sylla, who is also a member of the Simandou Strategic Committee that monitors the project for the government.\n\nAs Rio Tinto is a pure miner, Guinea is “often closer to Rio Tinto in the desire to maintain a high iron ore price”, he added, referencing the diverse interests of the Chinese stakeholders, which also include processing and steelmaking.\nThe project is expected to ramp up production over 30 months to reach its full commercial capacity of 120 million tonnes annually, a volume that will position Guinea among the top global iron ore exporters.\nA Rio Tinto executive who requested anonymity due to the sensitivity of the matter acknowledged the market reality that most global ore went to China, and said that since China Baowu Steel Group was a major partner for Simandou, “a lot of this ore will go to China, there is no doubt”.\nHowever, the executive said that Rio Tinto maintained market flexibility, saying: “Rio is not beholden to that and has the ability to sell to any market anywhere, so we will continue to explore those other markets.”\nRio Tinto and the Aluminium Corporation of China (Chinalco) own blocks 3 and 4 of Simandou under a consortium called Rio Tinto Simfer, while blocks 1 and 2 are owned by the Winning Consortium Simandou (WCS), whose key partners include Singapore’s Winning International Group, as well as China’s Weiqiao Aluminium and Baowu Resources. The Guinean government holds a 15 per cent stake in both, with an 18 million tonne share per year.\n\nCrucially, to overcome delays caused by a lack of infrastructure, Simfer and WCS jointly funded and built the shared 650km (404-mile) railway and port of Morebaya infrastructure.\nSylla described the Simandou situation as “extremely complex”, noting that Guinea’s interests sometimes aligned with Rio Tinto, sometimes with Baowu, and other times with WCS because “WCS is a logistics specialist”.\nSylla also highlighted a complementarity between Simandou and Australian Pilbara ore. Simandou’s high-grade deposit targets the premium 65 per cent iron content blend market, making it comparable only to Brazil’s Vale, especially the Carajás deposits.\nHe said this gave Rio Tinto the unique opportunity to offer both products and sell the premium ore not only to China but also to European and Middle Eastern steel mills.\nBut the Simandou project is widely dubbed a potential Pilbara killer, a reference to its long-term threat to Western Australia’s market dominance.\nAccording to Sylla, this superior quality is critical to China’s “green steel” industry and gives Rio Tinto the “unique opportunity to offer both products” globally, as most of Australian Pilbara ore typically focuses on the larger 62 per cent blend market.\nHu Wangming, the chairman of China Baowu, described Simandou as “a significant milestone” in the history of the global mining industry.\nIn a statement on Tuesday, Hu said that “the stable supply of Simandou’s premium iron ore resources will provide a solid foundation of low-carbon raw materials for the development of China’s steel industry and the global steel sector”.\nSimilarly, Chris Aitchison, general director of Rio Tinto Simfer, said that emerging steelmaking technologies required high-grade ore and Simandou’s quality allowed for reduced energy input in the process, thereby lowering carbon dioxide emissions.\n“So, there is a direct correlation between the benefits of sourcing Simandou ore and people being able to use that ore in their new steelmaking technology processes.” So, it is a direct enabler; it is very important for China to achieve their goals,” Aitchison said.\n\nBeijing-based lawyer Kai Xue noted that China’s shift from infrastructure to a hi-tech economy was reducing its demand for steel and iron ore. As China produced 54 per cent of the world’s steel in 2023, this transition signals a long-term contraction for the global iron ore market.\n“With supply rising and demand falling, someone will inevitably be pushed out and that someone is likely to be the Pilbara region of Western Australia. The reason is geopolitical,” he said of Simandou’s entry.\nXue argued that Australia’s Pilbara region was likely to be displaced due to geopolitical factors, specifically Australia’s 2021 entry into the Aukus security pact with the United States and United Kingdom, focused on acquiring nuclear-powered submarines to boost its military standing in the Indo-Pacific.\nThis move prompted China to diversify its supply chains, unblocking the long-stalled Simandou project in Guinea.\nInitiated by Rio Tinto in 1997, the project experienced many delays due to legal and political challenges before advancing with the partnerships involving Rio Tinto, Chinese firms and the Guinean government. Final construction started in 2022.\n“The first shipment marks the moment Australia’s strategic choices began to undermine its own resource economy,” Xue said.\n</div>

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<p>The launch of Guinea's US$20 billion Simandou iron ore project marks a globally significant milestone. The first shipment of ore departed from Morebaya port, attended by Chinese and African leaders. The project aims to use mining revenues to develop Guinea's infrastructure, agriculture, and education. Most ore is expected to be shipped to China, with concerns about market stability. Guinea and Rio Tinto aim to maintain high ore prices. The project will reach full capacity in 30 months, positioning Guinea among top global iron ore exporters.</p>

Why first Simandou iron ore shipment to China marks a global milestone