Rio Tinto

Simandou or Simandon't?

The Simandou deposit in Guinea ranks as a peerless untapped repository of iron ore. It would represent the biggest mining investment in Africa, rivalling even the oil industry’s mega-projects deep under the continent’s Atlantic coast. But like other fabled African prospects – take Congo’s Inga dam – it remains unrealised.

The mine, plus a 670km railway and a port to get the iron ore from a remote hillside to the world market, would cost about $20bn to build. That is three times the annual gross domestic product of Guinea, a nation just as mired in poverty as its volatile neighbours in west Africa despite already being the continent’s biggest producer of bauxite, the ore used to make aluminium. 

After gruesome 16-year-long civil war, Mozambique has got on with the arduous task of rebuilding the country.

The African state is now open for business, helped by political stability. It’s rich mineral resources have been a draw card for leading global miners. But big hurdles remain, especially the lack of infrastructure which has been a huge stumbling block for miners. And despite the government’s attempts at addressing the problem, it is still affecting business operations. Just ask Rio Tino, and Brazil’s Vale. 

Rio Tinto may have breathed a sigh of relief on Wednesday when Guinea’s mining minister, Mohamed Lamine Fofana, admitted it would miss a production target of 2015 due in part to the infrastructure challenges of the Simandou mega-project.

But Guinea’s president, Alpha Condé, on Friday overruled Fofana, insisting there was no change in the timeline. So the time pressure is back on then? 

By Julian Dierkes of the University of British Colombia

Rio Tinto and the government of Mongolia are committed to ramping up production at the Oyu Tolgoi gold and copper mine, one of the world’s largest. The recent turmoil between the two partners should push them to clarify their roles and help create more solid support for the project from the Mongolian public. 

Resource nationalism is a growing threat for companies in many emerging markets. The challenge for investors lies in distinguishing between arbitrary or predatory interventions, and legitimate attempts to clean up a broken system.

In Guinea, a mining code reform, an unchecked executive and simmering political tensions have prompted some risk analysts and lawyers to raise alarm bells. Are they justified, or is this a case of the country getting things straight? 

By Julian Dierkes of University of British Columbia

With the increased level of interest the world has taken in Mongolia given its blistering economic growth rate, resource nationalism is mentioned more and more often as a threat. But what exactly is this resource nationalism?

In Mongolia there is a parade of ideologies and slogans that are being lumped into the category of resource nationalism. They range from the obscure fringes of blood-line focused nationalism to the concerns of dedicated and serious politicians who are genuinely grappling with the challenges that rapid, almost instant, economic growth on the basis of a resource boom is bringing with it. Lumping these different streams together into a single category suggests that there is a coherent ideology that unites them. This is not the case. 

Mozambique is one of the much-sought after ‘M3’ emerging markets trio, along with Myanmar and Mongolia, with major offshore gas finds as well as large mineral deposits.

But mining is not as simple as setting a digger to work. While the country has around 23bn tonnes of coal, the infrastructure needed to support the extraction is starting from scratch. Any company that underestimates the costs can come unstuck, as Thursday’s resignation of Rio Tinto boss Tom Albanese shows

How much money can you lose up the Zambezi? Quite a lot if you are Rio Tinto.

The miner’s shares fell nearly 3 per cent early on Thursday after it announced a $14bn writedown and the departure of chief executive Tom Albanese and of Doug Ritchie, the man in charge of the group’s ill-fated Mozambique coal venture.

A spectacular example of the risks in mining – and the dangers of operating in emerging markets as the company disclosed that it never received formal approval for a key element of the Mozambique project – transporting coal on the Zambezi. 

After a few nervous months, Mongolia has secured a power supply agreement with China for the huge Oyu Tolgoi copper and gold mine. Rio Tinto, the Australian miner developing the $6bn project, confirmed on Monday that it had a binding electricity supply deal.

With that in place, the mine is all set to start commissioning in the next few weeks and begin commercial production next summer. 

For two years Robert Mugabe’s Zanu-PF has been ratcheting up the pressure on foreign-owned firms demanding that they dispose of a minimum of 51 per cent of their shares to indigenous Zimbabweans. This week’s agreement (in principle) for the localisation of majority ownership of Zimbabwe’s largest exporter Zimplats has the potential to be a gamechanger, economically and politically.

With elections due in the next 18 months, the Zanu-PF will be keen to push on with the programme. So which companies are next in line?