Disclaimer: The content of this article is written with authoritative information combined with personal opinions, and the source of the literature has been marked at the end of the article, please be aware.
Do you know that the pattern of iron ore in the continent and even the world may be changing?
Since 2011, the mainland's dependence on foreign iron ore has been as high as 80%, of which Australia is the main importer, and nearly seventy percent of the mainland's iron ore is imported from this country.
Because of excessive dependence on a single country, the development of iron ore in the mainland is controlled by others everywhere, and domestic iron and steel enterprises have a large number of losses every year.
On June 19 this year, China Baowu and "Win Alliance" completed the equity delivery of the Simandou iron ore project, and the development of this mine entered a new stage.
The Simandou mine has the world's largest untapped reserves and the highest quality iron ore, and mastering this mine will change the global iron ore supply and demand pattern and rewrite the rules of the game in the international market.
It's just that although this iron ore has large reserves and is easy to mine, it has not been well developed and utilized by many hands, so what will happen to China Baowu?
"Big cake" or "hard bones"
Simandou Iron Ore Mine is located in Africa, owned by Guinea, the whole mining area is divided into two parts, north and south, there are 1 and 2 blocks in the north section, and 3 and 4 blocks in the south section.
The combined proven reserves of the two stages are about 2 billion tons, which is only the surface reserves, and the deeper and peripheral reserves are not well proven.
In other words, the reserves on this iron ore mine are far less than that, and some experts estimate that the entire mining area may reach 10 billion tons.
The strength of Simandou Iron Ore is not only in terms of reserves, but also in terms of quality, with the overall ore grade here being between 66% and 67%.
The ore grade mentioned here is an indicator of the quality of the ore, that is, the percentage of useful components in a unit of ore.
It can reach an ore grade of 66%, which is one of the best in the world.
In addition, Simandou also has the advantages of mineral concentration and shallow burial, low development difficulty, and a lucrative "big cake", which has attracted the attention of many countries.
But many companies are just watching and don't dare to do it, because this is not only a "big cake", but also a "hard bone" that is difficult to bite.
There are five hard points in this "hard bone", one of which is inconvenient transportation.
Simandou iron ore is far from the port, and there is no decent railway for transportation, the Guinean government has made it clear that in order to obtain Simandou iron ore mining, it must build a 650-kilometer railway and a deep-water port.
Of course, if you can make full use of the value of this iron mine, the money invested in the early stage to build roads and open the port can easily return to the cost. It's just that it's hard to develop stably, because it can't be guaranteed just by relying on black and white.
This is the second difficult part of this "hard bone", the weak spirit of the Guinean contract.
In the past development, the Guinean government has accepted bribes and arbitrarily repossessed mining rights, and their behavior of black-box operation and arbitrary breach of contracts has seriously affected the mining of the mining area.
In addition, there is a third difficult point for this "hard bone", Africa's national resourceism.
In Africa, many countries, including Guinea, are unable to make money from mining their own ore and want to extract oil and water from miners, so a series of new mining regulations have been introduced.
Among these new regulations are increased tax rates for mining companies, and the government has made it mandatory to take shares.
For example, the Guinean government's approval of the Simandou Iron Ore Mine No. 1 and No. 2 Basic Mining Agreement requires the government to hold 15% of the dry shares, and to collect up to US$15.5 billion in resource taxes from these companies over the next 25 years.
The government's shareholding and high taxes have seriously affected the profits of mining companies and brought enormous pressure.
Next is the fourth difficult place for this "hard bone", social instability.
Guinea has been a country with a long period of military rule, and the overall political situation has improved since the establishment of the New Deal in 2011, but there are still local riots at any time.
Problems such as pollution and power outages caused by the opening of the mine have conflicts with the local people, and can easily lead to workers' strikes and popular riots.
Just like the violence that took place on May 8 this year, local people said that two young men were shot dead by soldiers and attacked the development project, resulting in the burning of trucks, bulldozers and other equipment of the Simandou project, as well as the destruction of excavators, containers, and houses in residential areas.
In addition to the local people, foreign forces also pose a great threat to Simandou, which is the fifth difficult place for the "hard bones".
The value of Simandou iron ore is obvious to all, and if the mainland is mined in large quantities, it will inevitably arouse the vigilance of international iron ore giants.
For example, Australia, a major importer of iron ore on the mainland, can bring down the price of iron ore with lower production costs, while Simandou has a high mining cost and cannot reduce the price at all.
In this way, the low-priced party can easily merge the high-priced party, and the Simandou iron ore mine is in their hands.
History of the development of Simandou
Although Simandou is difficult to develop, it is still valued by many enterprises and has caused a lot of disputes.
As early as 1997, the Sinfer subsidiary of Rio Tinto, founded in Spain, was granted a prospecting licence for 1,488 square kilometres of the Simandou iron ore mine.
However, until the expiration of the prospecting period, Sinfer did not carry out substantial mining, and the Guinean government gave him two more years, but Sinfer still did not act.
The reason why the company did not move was to take into account the difficulties mentioned above, and secondly, it wanted to maintain monopoly profits and occupy the largest iron mine, so that others could not mine it, so that its own iron ore could be sold.
The Government of Guinea is very unhappy with such acts. In 2008, the Guinean government took back the mining rights in the northern section of Simandou and sold it to Israel's BSG Resources.
Vale then paid $2.5 billion to acquire a 51% stake in the Simandou North block from BSG Resources.
BSG Resources did a solid job and quickly organized mining, but later someone broke the news that the company used bribery to obtain iron ore mining rights.
Rio Tinto seized the opportunity to file a lawsuit in the United States for theft of trade secrets, bribery and other crimes.
In 2014, the Guinean government confirmed the bribery following an investigation and took back the mining rights of Vale and BSG Resources.
Of course, the repossession was not a one-word affair, and the problem continued until 2019, when French President Nicolas Sarkozy mediated and BSG Resources abandoned the Simandou North mining project and retained the smaller Zogaota iron ore mine.
Guinea reclaimed the mining rights for the northern section of Simandou and launched an international public tender in July 2019.
In October of the same year, China's Hongqiao Group, Singapore's Winning International Group, Yantai Port Group and Guinea United Mining Supply Group formed a "Winning Alliance" and began a final bid with Australia's Futesco Metals Group.
In the end, Invertek Metals did not agree to the request to build a railway and a deep-water port, and the bid failed, and the winning alliance won the mining rights.
In June 2020, the Winning Alliance signed an agreement with the Guinean government, committing the Guinean government to obtain a 15% dry stake before the Simandou iron ore mine was re-developed.
Baowu joined
Today, the four major groups of the former "Winning Alliance" are only Winning International Group, China Hongqiao Group, and Guinea United Mining Supply Group.
On June 19 this year, China Baowu Iron and Steel Group and the "Winning Alliance" completed the formation of the board of directors and the delivery of equity changes for mines, railways and ports.
Since then, Baowu has become the new shareholder of the Simandou project and will work with the "Winning Alliance" to develop the northern Simandou block.
Winning International said that more than half of the infrastructure construction work in the Simandou mining area has been completed, and the project has made great progress, and the participation of China Baowu will greatly promote the development of the project.
According to the latest shareholding ratio, the future development of the northern mining area of Simandou will be led by Baowu Group.
The Simandou mine produces about 110 million tonnes of ore per year, and a small part of this iron ore is sold abroad, and a larger part should be shipped back to China.
This requires its own fleet as a guarantee, and Baowu Group's Baochuan Shipping Co., Ltd. will provide feasible solutions for the transportation of this batch of iron ore.
It is expected that in the future, Baowu Group will successfully develop the Simandou iron ore mine, change the pattern of China's iron ore, get rid of foreign dependence, and improve its competitiveness.
Resources:
[1] "Analysis of the Ownership History and Development Prospect of Simandou Iron Ore in Guinea", Global Geological and Mineral Information Network Portal, 2020-08-25
[2] "Rio Tinto Accelerates Construction of Simandou Iron Ore Project", Global Geological and Mineral Information System, 2023-12-06
[3] "Is Simandou, a world-class iron ore mine, really a "big cake"? 》China Mining News, 2020-07-06
[4] "Simandou Winning Alliance and China Baowu Complete Equity Delivery of Simandou Iron Ore Project", Jiemian News, 2024-06-20
[5] "China Baowu Enters the World's Largest Iron Ore Project, Will Ship Large-scale Ships/Buy Ships!? 》Shun Tak Maritime 2024-06-22
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