Guinea on the brink of iron ore boom - CNBC Africa

Guinea on the brink of iron ore boom

By: Dara Rhodes
Last Updated: 30 May 2014|14:19 GMT

The president of Guinea, Alpha Conde has signed an iron ore deal that has the capacity to lift the country out of poverty.

The deal has the potential to lift the country out of poverty. PHOTO: Getty images

The world’s second-biggest mining company, Rio Tinto agreed financial terms with the government of Guinea for a 20 billion dollar deal geared towards the development of the country’s iron ore deposits.

“I think it’s a very important move. What we’ve seen in Guinea is, a vastly inequitable contract that was created in a corrupt fashion between an Israeli billionaire and the old Guinean dictatorship,” Simon Allison, senior reporter for the Daily Maverick told CNBC Africa.

Before the new agreement was signed, Rio was awarded concessions to Simandou almost 10 years ago but was forced to give up those in the Northern part of the range hills in 2008. The concessions were then given to BSG Resources (BSGR), a company controlled by Israeli billionaire, Beny Steinmetz.

“What happened with the old contract was that, the company, BSGR sold 51 per cent of its stake that it had got for approximately, a couple of 100 million dollars to the Brazilian mining giant, Vale, for five billion dollars,” he explained.

“That contract has essentially been ripped up by the new government which was elected democratically and is being replaced by a new one.”  

The 20 billion dollars investment framework, provides legal and financial backing for the Simandou project which has been delayed for years and experts believe that it has the potential to become the biggest iron ore and infrastructure project developed in Africa.

“The new one is worth 20 billion US dollars in terms of Capital investments from the mining giants, Rio Tinto and Chinalco, the Chinese aluminium firm. The previous contract, was worth about 200 million dollars to the previous Guinean government,” he said

Rio Tinto will take a 46.6 per cent stake in the project, Chinalco 41.3 per cent, Guinea 7.5 per cent and the International Finance Corporation, 4.6 per cent. The BSGR permits were withdrawn by the Guinean government last month, making way for the deal between Rio Tinto and Chinalco.

“It is very encouraging to see African governments taking a stand and saying look, if a contract was negotiated and concluded as a result of corrupt practices and it’s not benefitting the people where those resources are, then we need to re-consider it,” he added. 

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