Hidden under the lush forests of southern Guinea is the world’s largest untapped deposit of iron ore, a resource so rich it covers dirt roads, trees and just about everything above it in a burnt, rust-red dust.
The Simandou deposit has some of world’s highest-grade, lowest-impurity ore, enough to satisfy 12 percent or more of global seaborne demand for steel-making iron ore and transform one of the world’s poorest countries into a major producer.
Yet in more than 100 years since it was first discovered, not a scrap of iron ore has been dug out. Decades of corruption and unrest have left it trapped in the ground.
The government of Guinean President Alpha Conde — elected in 2010 in Guinea’s first free vote after 50 years of one-man rule and two years of a military junta — has promised prosperity for the nation’s 10 million people and wants to make Simandou pay.
However, the authorities must first decide whether to honor deals negotiated by previous governments, or demand better terms. The government began a systematic review of mining contracts earlier this year, leaving Simandou’s future in limbo.
“For many years, the management of the Guinean mining sector was characterized by shadowy deals and uncertainty. This review process aims to normalize the sector and put an end to those bad practices,” Guinean Minister of Mines Mohammed Lamine Fofana said.
However, the owners of the concession for the northern half of Simandou, Brazil’s Vale and the Israeli diamond billionaire Beny Steinmetz’s BSG Resources (BSGR), say they have frozen their project because of the uncertainty.
“The issue is in the hands of the Guinean government,” Vale chief executive Murilo Ferreira said last week. “They set the rules; they tell us what rules govern a project and they have not communicated the rules for this project yet.”
Some industry and Guinean sources, including former Guinean minister of mines Mahmoud Thiam, believe the government’s review of mining licenses is targeting specific companies, including BSGR.
Some even suggest that the government’s plan may be to revoke the BSGR/Vale concession, a move the firms say would be a disaster for Guinea and could leave the iron ore trapped for many more years by legal battles and political uncertainty.
“We are getting to a critical state whereby if necessary, we’ll seek diplomatic protection from the Israeli government because this is beginning to look like an expropriation in another name,” said lawyer Momo Sakho, a former legal adviser to the Guineana Ministry of Mining who now works with BSGR.
The government says it will finish reviewing BSGR’s rights over the concession early next year.
Most of the world’s seaborne iron ore is produced in Brazil and Australia, and a handful of firms with roots in those two countries overwhelmingly dominate the sector. They now loom large in Guinea.
Permission to mine Simandou is split between the two biggest iron ore mining firms — Brazil’s Vale with Steinmetz in the north of the concession, and Anglo-Australian Rio Tinto with China’s Chinalco in the south.
Rio was the first company to commit to Simandou, spending about US$350 million developing a project there until 2008, when the government of long-ruling former Guinean president Lansana Conte revoked its permit, saying the firm had moved too slowly.