--B&A Mineracao could help with commercial arrangements for
Simandou ore
--Guinea government approached B&A to talk about logistics,
B&A says
--B&A director says looking at options only in Rio Tinto
project area
By Diana Kinch
RIO DE JANEIRO--Brazilian mining concern B&A Mineracao, a
venture set up by Vale (VALE, VALE5.BR) ex-president Roger
Agnelli's AGN Participacoes and Banco BTG Pactual S.A. (BBTG11.BR),
may help the Guinean government sell iron ore, a B&A director
said.
B&A has already held talks with the government of the West
African country on how to make production of iron ore economically
viable in an area of the Simandou mountain range, which is operated
by mining company Rio Tinto's (RIO) Simfer subsidiary, B&A
board of directors member Fabio Spina said in an interview.
The talks, also involving logistics interests of AGN, focused on
the possibility of advising the Guinean government on transport
options to facilitate the shipment of ore from the site, Mr. Spina
said. No agreement has yet been signed either on consulting or
logistics, he said.
"We don't rule out the possibility of helping the government
sell the ore," Mr. Spina said. "There is also a possibility of
involvement by B&A in mining at the Simfer and government
mining area."
Simfer has rights to an area of high-quality iron ore that could
produce as much as 95 million metric tons a year. Rio Tinto said in
April 2011 that it had signed an accord with the Guinean government
by which the government could take up to 35%, including 15% at no
cost, in the mine and associated infrastructure project. The
project could cost an estimated $10 billion, with the first ore
production in 2015. The accord also involves Rio Tinto paying a 30%
general tax rate after eight years of operation and royalties
payable on all exported ore at 3.5% over the export price.
The project involves construction of a new rail line through
Guinea and a new port, in both of which the government can hold a
maximum 51% stake, according to the accord signed with Rio
Tinto.
China's Chalco and International Finance Corp. also hold stakes
in Simfer.
Mr. Spina said the cost of the infrastructure project alone may
have risen to $12 billion, while the mine project could involve
investments of $7 billion to $8 billion.
"The Guinean ore is fantastic quality, but there's no way to
ship the ore yet," he said. "The Guinea government approached us.
We're talking on railroad and port options for exports."
Mr. Spina added, "They've got one or two Carajases there, yet
people are going hungry," comparing Guinea's Simandou's mountain
range to the mineral-rich Carajas province in northern Brazil.
BTG Pactual bank is meanwhile looking at the possibility of
raising funds for logistics development in Guinea in a separate
project, Mr. Spina said.
"It's not impossible for foreigners to mine ore in Guinea," he
said. "The equations are so complex and the size of the check's
really big. But the golden opportunity is now" to develop new iron
ore properties such as Simandou, because the China-led boom for
iron ore may not last for more than another 10 years, he said.
Currently, the nearest rail option for Simandou ore is a
railroad in neighboring Liberia operated by ArcelorMittal (MT),
which connects to Buchanan port.
Vale, together with Israeli company BSG Resources, also has a
project at Simandou, which could produce up to 50 million metric
tons a year of high-grade ore. However, Vale executives said
recently that the company is awaiting a position from Guinea's
government on details of the country's new royalties law before
confirming a go-ahead for the main part of the project.
For the time being, Vale and BSG continue to ramp up their
Zogota iron-ore project at Simandou, which is due to start up
before the end of the year with initial production of two million
tons a year of iron ore and an eventual capacity of 15 million tons
a year, a Vale spokeswoman said.
Write to Diana Kinch at diana.kinch@dowjones.com
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