Glencore puts its hand up to develop Simandou iron ore deposit

Despite schooling miners on issues of oversupply and  stating its disinterest in greenfields projects, resources giant Glencore is said to be in the bid for the high-quality Simandou iron ore deposit.

After stripping BSG Resources (BSGR) and Vale of the ore body’s block 1 and 2 deposits earlier this year amid accusations of corruption and bribery, the Guinea government will soon decide who it will award the hotly contested mining assets to.

Glencore has reportedly told the government it holds a “high level of interest” for the development rights of  Simandou North.

Business Spectator reports a contingency of Glencore representatives travelled to the Guinea capital of Conakry in early June and met with senior government officials.

Other contenders are said to include BHP Billiton and ArcelorMittal.

In May, Rio Tinto announced it was close to finalising a $US20bn deal which would see the development of its stake in Simandou.

At full production, Rio’s share of the deposit could produce between 95 million and 100 million tonnes of iron ore a year.

Rio chief Sam Walsh said the project represents “a new paradigm for Guinea”.

However Glencore’s foray into the iron game has caught some in the industry by surprise as the company has little exposure to the commodity.

Glencore chief Ivan Glasenberg has previously stated he is not interested in investing in greenfields projects, describing the ventures as “risky”.

Glasenberg has also criticised mining CEOS for saturating the industry with new mines which he blames for a surplus in metals and shrinking profits as prices soften.

However with high-grade iron ore and very low cash costs expected, the Simandou deposit has proven it’s a prize worth fighting for despite its troubled history.

Rio had to pay $700 million in 2011 to keep the project. Under the deal the Guinean government can claim 15 per cent in the project at no expense.

Block 1 and 2 were also owned by Rio until the Guinea government gave them to BSGR which in turn sold half its rights to Brazilian miner Vale.

In the wake of the suspension of its licences, BSGR has begun arbitration with the International Centre for Settlement of Investment Disputes against the Government of Guina and its president, Alpha Conde.

Meanwhile, Rio has filed a legal complaint against Vale and BSGR for the loss of the licences in the first place.

Rio Tinto claims that the defendants stole the mining rights for Simandou blocks 1 and 2 in 2008 and later entered an agreement with Vale who had already obtained propriety knowledge, after Rio spent more than a decade and hundreds of millions of dollars in developing the site.

In its filed complaint, Rio stated that negotiations between it and Vale started in 2008, and Rio provided the information regarding Simandou. It stated that “as Vale quickly surmised, gaining control of the Simandou deposit would strengthen Vale's position in the world's high-grade iron ore market, since the only other comparable source is Vale's own Carajas Iron Ore Mine in Brazil”.

Vale had denied any claims of wrongdoing and according to is also expected to re-apply for the resource after being given the all-clear by the Guinea government.

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