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The government of Guinea is in the final stages of preparing a tender for blocks 3 and 4 of the Simandou iron ore project, sources close to the matter have told Steel First. Guinea’s government will be working through the final stages of administrative work on the tender in the next few weeks, Steel First understands.
The concession contains millions of tonnes of high-grade iron ore and is expected to be sold in an open tender process by the end of this year.
The tender process is being managed by Guinea’s minister for mines, Kerfalle Yansane, who has been travelling the globe visiting interested parties in a bid to build interest in the tender.
The timeline of the tender is subject to possible delays, due to the continuing crisis caused by the outbreak of the ebola virus in the country, sources told Steel First.
Ebola, a deadly virus for which there is no proven cure, broke out in Guinea earlier this year and so far has claimed the lives of hundreds of people in the country.
The Guinean government postponed an investment forum in London scheduled for later this month, saying that it needed to concentrate its efforts on fighting the spread of the disease.
Sovereign wealth funds and other non-miners are among the bodies likely to bid for the concession, Steel First understands.
State-owned companies from China and Middle Eastern funds have been in talks with representatives of the Guinean government, according to sources, who suggested that a consortium of interested parties was likely to put forward a bid.
Individual companies reported to be interested in making a bid include steel major ArcelorMittal and commodities giant Glencore.
Glencore made a presentation to the Guinean government in June expressing its interest in Simandou, according to reports.
A Glencore spokesman denied that employees of the company had visited Guinea to express its interest in the project.
An insider at the trading house said that Glencore would bid for the concession only if the multi-billion-dollar infrastructure associated with the project was taken on by a third party.
ArcelorMittal, which last month agreed to buy more than 50% of Guinea’s Euronimba iron ore mine from BHP Billiton and Areva, has recently held talks with Guinea’s ministry of mines in Conakry but has not confirmed its interest in Simandou.
Brazilian mining giant Vale, which held 50% of the concession until it was stripped in April from its VBG joint-venture company with BSG Resources, is also understood to be looking to bid.
The Brazilian miner’s ceo, Murilo Ferreira, told investors in July that discussions with the government of Guinea were “advanced” and that the miner was “diligent in developing alternatives to recover value from our investment in Guinea”.
The government of Guinea did not respond to calls for comment at the time of publication.
Allegations of corruption and regulatory issues have plagued the development of the potentially lucrative Simandou project, a huge, untapped reserve of top-grade direct shipping ore.
Anglo-Australian mining major Rio Tinto held the concession to the entire project until mid-2008 when half of the project, northern blocks 3 and 4, was stripped from it by the country’s then leader, Lansana Conte.
Conte cited lack of progress on the development of the mine as a reason for expropriating half the concession.
UK-registered mining company BSG Resources, the mining arm of Israeli billionaire Beny Steinmetz’s group of companies, was granted the concession in late 2008 and sold a 50% stake in the project to Brazilian mining giant Vale for $2.5 billion in 2010.
Rights to mine the northern half of the Simandou project, blocks 3 and 4, were stripped from VBG earlier this year by Guinea’s government after an investigation by a technical review committee.
The committee recommended the removal of the licence based on evidence which, it alleges, proves that BSG Resources obtained the rights to mine in Guinea by corrupt means.
BSG Resources has strongly denied all wrongdoing.
Rio Tinto, along with joint-venture partners Chinalco and the International Finance Corp, still holds the rights to develop the southern part of Simandou and signed an investment agreement with the Guinean government outlining its development plan for the mine earlier this year.
Sources said that the company or consortium which wins the northern Simandou concession will need to have the capacity to make a significant contribution to a multi-billion-dollar infrastructure project which will connect the mine by rail to Guinea’s Atlantic coast ports.