LONDON - Mining heavyweight Rio Tinto (NYSE:RIO) has announced a substantial investment plan focusing on the Simandou project in Guinea, which is poised to tap into one of the world's largest undeveloped high-grade iron ore reserves. The company is directing $6.2 billion into essential infrastructure, including the development of ports and railways necessary for the project.
In a strategic move to bolster its portfolio, Rio Tinto is also setting aside a significant portion of its capital for growth projects over the next few years. The mining giant plans to allocate an annual capital expenditure of $10 billion from 2024 to 2026, with up to $3 billion earmarked specifically for expansion endeavors. This includes the advancement of its Oyu Tolgoi copper mine as well as other key copper and lithium projects.
CEO Jakob Stausholm highlighted the robust demand for high-grade iron ore, especially types that are compatible with electric arc furnaces. This demand underpins the company's decision to proceed with the Simandou project despite concerns about potential market oversupply and prevailing challenges within China’s property sector.
Stausholm expressed confidence in the project's timeline, anticipating that production will kick off by 2025. Following commencement, Rio Tinto expects a gradual ramp-up to reach an impressive annual output of 60 million metric tons over the subsequent months.
The Simandou project is a collaborative effort involving not only Rio Tinto but also the Guinean government and a Chinese-led consortium responsible for the southern section of the project. Winning Consortium Simandou manages the northern part, indicating a multi-stakeholder approach that could have significant economic implications for Guinea and contribute to diversifying global iron ore supply sources.
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