Simandou III

completed

The Simandou Project is a world-scale mining project comprising: (i) an open pit iron ore mine in the Simandou Range in southeastern Guinea, approximately 600 km south east from the Guinean coast, (ii) a trans-Guinean railway of approximately 670 km in length to transport the ore from the mine to the Guinean coast; (iii) a new Port facility located south of Conakry in the Forécariah prefecture; and (iv) various associated developments providing utilities and infrastructure to the project including construction workforce facilities, roads, quarries, power generation and distribution and water supply. First ore is anticipated in 2015, with the production expected to increase over the following years to an estimated 95 million tonnes per annum.The mining resource is located in the southern part of the Simandou Range and covers deposits at Pic de Fon and Ouéléba. The main geological units are known technically as hematite and goethite (iron ore), itabirite and phyllite. These minerals extend up to 500 m below the surface and the two orebodies are estimated to contain more than two billion tonnes of high grade iron ore. The Simandou Project is being developed by Simfer, a Guinean-registered company. Simfer is a subsidiary of the international mining group Rio Tinto, and holds a mining concession to explore and mine iron ore in the southern part of the Simandou Range. Simfer is owned 5% by the International Finance Corporation (IFC) and 95% by a company owned jointly by the Rio Tinto Group (53%) and a consortium led by Aluminium Corporation of China, Chalco, (47%). In April 2011, the Republic of Guinea and Simfer signed a Settlement Agreement pursuant to which a modified mining concession covering the southern part of the Simandou range was issued to Simfer. The Settlement Agreement also provides inter alia, for the separation of the mining activities from the principal infrastructure activities (the railway and port). The mine will continue to be held by Simfer whereas the rail and port infrastructure will be held by an infrastructure company to be established between the Republic of Guinea and Simfer’s other shareholders (Rio Tinto, Chalco and the IFC).The total project financial commitments for Simandou III activities currently forecast at approximately $4.0 billion. This amount includes the $700 million settlement sum (as agreed in the agreement signed between Simfer and the GoG, announced by Rio Tinto plc on 22 April 2011), technical studies and resource definition drilling through to the completion of the PEA and DE, as well as long lead item orders and early construction works. The long lead item orders and early construction works will be necessary during this period in order to achieve the targeted first production in 2015.IFC received board approval on May 24, 2012 to invest an additional $150 million to contribute towards achieving the Decision to Mine milestone at the end of 2012. In 2006 IFC obtained board approval to invest $5 million in equity to Simfer (Simandou I project) and a further $30 million in 2007 (Simandou II project), of which $32 million in total has been disbursed.