At a press conference ahead of an investor day in Sydney on Wednesday, Rio Tinto CEO Jacob Stosholm announced plans to bring forward the start of production at its Simandou iron ore project in Guinea to 2025, with plans to invest about $6.2 billion, including port and rail infrastructure, Reuters reported.
Simandou, which will be the world's largest and highest-grade new iron ore mine, will come on stream a year earlier than expected and add about 5 per cent to global seaborne supply.
Rio owns two of Simandou's four mines as part of Simfer, a joint venture with China's Chinalco Iron Ore Holding Co and the Guinean government. Rio Tinto owns 53 per cent and CIOH owns the rest.
The Simandou project has been the subject of negotiations due to a complex ownership structure, delays caused by legal disputes, political changes in Guinea, and construction difficulties.
Rio Tinto said in a statement that project development would require an initial capital of about $11.6 billion.
From 2024 to 2026, Rio Tinto's annual capital investment is expected to be around $10 billion, with the majority invested in Simandou as spending on Mongolia's Oyu Tolgoi project winds down after 2024.
First production from the two blocks co-owned by Rio Tinto is expected to ramp up to 60 million tonnes of annual capacity within 30 months, starting in 2025. The company said its share of production would be 27 million tonnes.
The increase in iron ore supply is expected to weigh on iron ore prices, affecting Brazil's Vale, a producer of high-grade iron ore.
"We already forecast a sizable long-term iron ore surplus, and sanctions on this project could reinforce the long-term bearish outlook for iron ore," RBC said in a note.
The other two blocks in Simandou are being developed by the Simandou Yinglian Group (WCS), which is made up of Singapore-based Yinglian International Group, Weiqiao Aluminum (owned by China Hongqiao Group) and United Mining Suppliers.
