(Repeats Tuesday story with no changes)
* Legal wrangles, delays mean no ore yet mined from huge
* Price tag of development project estimated at $20 billion
* Needs 650 km of railway, 35 bridges, and 24 km of tunnels
* Rio Tinto, Vale, Israeli billionaire in legal rights
By Saliou Samb
BEYLA, Guinea, Aug 5 In a remote, southeastern
corner of Guinea, the mist-shrouded Simandou mountain range
rises above the lush forest. Buried under its green slopes lies
some of the planet's finest iron ore, a treasure long coveted by
the world's mining giants.
But any profit, for Guinea or the firms, will remain locked
in the russet ground until an export outlet to the coast is
cleared, a task that will involve building 650 kilometres (400
miles) of railway, 35 bridges, and 24 km of tunnels.
Coupled with the need for a new port to load the ore onto
ships, the initial price tag would be around $20 billion, making
it Africa's biggest mining project ever, to be carried out in
one of the continent's most unstable and rundown nations.
"The logistical challenge is such that the whole project
remains on hold until the infrastructure can be put in place to
get the ore out," said Madani Dia, a Guinean mining analyst.
Lack of adequate infrastructure - ports, roads and railways
- to expand the trade and export of Africa's mineral riches is
one of the biggest brakes on the continent's faster growth.
Global firms including Rio Tinto and Brazil's Vale
have for years been eying Simandou, and most recently
miner and commodity trader Glencore has expressed
interest in Guinea's iron ore, a presentation obtained by
Yet a mixture of political instability, protracted rows over
rights and the eye-watering price tag for the overall project
have meant actual production still remains a distant prospect.
A complex legal battle is playing out over the northern half
of the huge deposit, with an Israeli billionaire, Vale, Rio
Tinto and Guinea's own government all battling to defend their
positions after President Alpha Conde's government revoked
rights to the two northern concession blocks this year.
Few doubt Simandou's huge potential. "Guinea's current GDP
is around $6.8 billion. To develop Simandou, up to $20 billion
must be spent over the next five years, so the potential impact
on the national economy is absolutely enormous," said Tom
Wilson, head of intelligence and analysis at consultancy Africa
But the risks are of similar proportions.
"It's suicidal to invest in Simandou," said a senior mining
company executive who asked not to be named. He said that on top
of the infrastructure challenge, Guinea's volatile politics and
business climate made it a big gamble.
"God knows how many times the government might change the
mining code etc. ... It's a very high-risk investment in a
country where laws and rules are not stable," the executive
said. Since February, Guinea has also been fighting an outbreak
of the deadly Ebola virus, which has killed more than 350 people
Complicating any investment proposal, Guinea also insists
Simandou's ore must be shipped from its own coast, rather than
taking a shorter route via neighbouring Liberia.
In a sign of some progress after years of discussions and
delays, Rio Tinto and partner Chinalco, the firms who
control the southern two of Simandou's four blocs, signed a deal
with Guinea's government in May outlining investment plans.
Although Simandou's ore grade is viewed as one of the best
among untapped reserves in the world, a sharp fall in prices of
ore, as supply outstripped more moderate demand growth, has
cooled interest for new iron ore projects. Shareholders are
pressing mining firms to be much more careful about big risky
Iron ore, the main ingredient in steel, now trades around
$95 per tonne, down from a peak of almost $200 in 2011, and
analysts expect prices to fall further in the next few years.
BATTLE OVER JEWEL IN THE CROWN
Far from the corporate offices and the courtroom battles,
four-wheel-drive vehicles bounce down rutted tracks and up steep
forested inclines en route to the colonial town of Beyla, beyond
which Simandou emerges, its peak rising to 1,600 metres.
"In the 1990s, to reach the mountain you had to put your
tent on your head and go by foot," said Thierno Oumar Barry, a
geologist at Rio Tinto.
When the rain falls, passenger busses and trucks ferrying
goods sink deep into the mud. Locals say it is still often
easier to walk, or travel by motorbike.
First identified as a potentially iron-rich zone over a
century ago, Simandou has for decades been seen by mining firms
as the jewel in the crown of West Africa's vast mineral riches.
Small exploratory missions were carried out during French
colonial rule and by Chinese geologists during the 1970s. Tests
have revealed iron ore of up to 63 percent concentration.
By 1997, Rio Tinto had secured the rights to the four blocks
that make up Simandou. However in 2008, the firm was stripped of
the northern half, accused by Guinea's late strongman leader
Lansana Conte of not developing the project quickly enough.
The confiscated blocks were snapped up by Israeli
billionaire Beny Steinmetz's BSG Resources. Brazil's Vale then
bought a 51 percent stake of these in a $2.5 billion deal. It
paid $500 million upfront and says it subsequently spent $700
million starting to develop the licence.
However, an investigation by U.S., Guinean and European
authorities into how BSGR secured the concession has resulted in
a former BSGR associate being jailed for corruption and Guinea
stripping BSGR and Vale of the permit in April.
Barry, the Rio Tinto geologist, says the southern blocks 3
and 4, known as Ouleba and Pic de Fon, contain an estimated 2.4
billion tonnes of iron ore. Rio Tinto says the two blocks will
produce 100 million tonnes a year at full production.
But Guinea's stripping of BSGR's northern section permits
has triggered lawsuits by Rio Tinto, Vale and BSGR, adding to
years of wrangling that have already delayed hopes of developing
Simandou with one master plan, an approach experts say would be
As a result of the delays and legal disputes, not a single
tonne of ore has yet been exported from Simandou. In Beyla, some
25 km (15 miles) to the east, the frustration is tangible.
"I have been in Beyla looking for work with Rio Tinto for
five years," Mamoudou Fofana, a heavy machinery specialist, told
Reuters in the town, which turns to dust or mud with the
seasons. "But it has come to nothing."
At peak output, Rio Tinto said the project would create
4,000 direct jobs, 95 percent held by Guineans. Overall, 45,000
jobs would be added to the economy.
Hopefuls have been gathering for years in Beyla town and
Moribadou, a collection of mud huts, where the population has
jumped from 300 people in 1997 to 7,000 today.
Both places witnessed violent protests over the lack of jobs
"Life is getting more and more difficult here," said Djiba
Camara, president of Moribadou's youth association.
Camara said the cost of basic goods like rice had risen by
nearly 70 percent and insecurity had spiked.
The Rio Tinto-Chinalco May agreement to develop Simandou
does not give a precise timeframe, but a detailed feasibility
study is due within a year, and in principle the first ore train
is slated to depart by the end of 2018.
Once Simandou is producing, Guinea should benefit on many
fronts. The investment in infrastructure will unlock access to
the interior while bringing in $1 billion in revenues each year
and eventually doubling the size of Guinea's economy, according
to documents on the project prepared by Rio Tinto.
Cece Noramou, a former government official now working on
the project, says other firms are already eyeing opportunities.
France's Bouygues is interested in building tunnels,
while General Electric is keen to supply locomotives.
Involvement of the World Bank's private sector arm, IFC,
which holds 5 percent in the Rio Tinto side of the deal, is
intended to give confidence to investors.
Rolake Akinkugbe, vice president and head of natural
resources at FBN Capital Nigeria, said funds for infrastructure
were likely to come from investors ready to take the long-term
view on Guinea, Asian export credit agencies watchful of demand
for steel and other development institutions.
But optimism is taken with a pinch of salt in the
"For 17 years, Rio Tinto have been making promises that
never materialise," said Mamadi Camara, manager of Villa Syli,
Beyla's only functioning hotel.
(Additional reporting by Silvia Antonioli in London; Editing by
David Lewis/Pascal Fletcher and Will Waterman)