Rio Tinto is selling its stake in Guinea’s Simandou iron ore mine to Chinalco in a deal that will be worth between $1.1 billion and $1.3 billion.
Rio was the highest shareholder with 46.6 per cent ownership. The Chinese-owned Chinalco has 41.3 per cent, with the buyout giving them a majority ownership of 87.9 per cent. The Guinea government has a 7.5 per cent holding.
Rio has spent over $3 billion on the project, but due to the chequered history in the politically unstable country – and the loss of a lawsuit in the US recently – the company has decided to divest itself of its shares.
This is good news for the Guinean government as political upheaval in the form of coups has left the very poor nation in limbo with one of its greatest natural resources stuck in the ground. Chinalco, with the backing of the Chinese government, will have more political sway than a company such as Rio Tinto.
Simandou has more than two billion tonnes of reserves of very high grade iron ore, which is worth more than $110 billion at today’s prices.