Rio Tinto Sells $ 50 Billion Share in Iron Ore Mine

Rio Tinto Limited has announced plans to sell its Simandou iron ore project to Chinalco China, the world's largest consumer of iron ore.

Simandou, located in Guinea in Africa, is estimated to have the world's largest untapped iron ore reserves (2 billion tonnes), valued at US $ 50 billion. Rio currently owns 46.6% of the shares, Chinalco 41.3%. and the government of Guinea controls an additional 7.5% of the project.

The Simandou project, due to its remoteness, needs $ 20 billion in funding for the construction of 130 kim roads and more than 600 km of railways. This is because the Guinean government wants to use its own ports to ship ore, rather than a shorter route to ports in neighboring Liberia.

Rio had a hard time finding the funds to finance the project, as CEO Jean-Jacques Sébastien said: "There is no obvious way to move Simandou to the next phase."

Rio is expected to receive between $ 1.1 and $ 1.3 billion from the sale of its stake in the mine. Although iron ore prices are rising, many analysts expect prices to fall to a more stable level in the $ 40 - $ 50 per tonne range. The spot price is currently US $ 64 per tonne. Even with current iron ore prices, project financing may be difficult. In addition, the sale of a stake is a good decision for the company for a number of other reasons.