Reuters reported that Brazil's Vale, the world's top iron ore producer, has blamed a Guinean government U turn on rail and port links and shifting, unclear regulation for its decision to shelve the giant Simandou iron ore project.
Vale said that it remained interested in working in Guinea and at Simandou, site of the world's largest untapped deposit of iron ore, but needed clarity to proceed with the project. It stopped work on its part of the deposit in the spring and froze activity at the smaller Zogota project months later.
Both projects, which Vale is developing with BSGR, the mining arm of Israeli entrepreneur Beny Steinmetz's business conglomerate, have been shelved, raising questions about the their future as the government reviews mining contracts.
Mr Murilo Ferreira CEO of Vale said that "We are still interested in being in Guinea. But we need clarity. We have shareholders, and we need to be transparent with them."
Mr Ferreira said that "The issue is in the hands of the Guinean government. They set the rules; they tell us what rules govern a project and they have not communicated the rules for this project yet."
Among the major question marks for Vale is the export route for the millions of tonnes of high grade iron ore that will be mined in Guinea's forested south.
Unlike Rio Tinto, which is developing the southern part of Simandou and will export through Guinea, Vale had hoped to export through neighboring Liberia a shorter and less expensive route but a less popular option with the government.
Mr Ferreira said that the government had informed Vale and BSGR that the export route would be through Guinea, scrapping an earlier concession which they obtained in exchange for agreeing to build an almost 700 kilometer rail line. That would drive up risks and project costs already estimated at USD 10 billion.
Simandou's northern blocks, the area held by Vale and BSGR, were originally part of Rio Tinto's Simandou concession but were stripped from the mining major in 2008 after the government said it was moving too slowly. Vale bought a stake in the northern blocks in 2010 from BSGR in a USD 2.5 billion deal. Only USD 500 million has been paid and Vale said targets had not been met for more to be paid out.
The Brazilian company said that the government has been considering Vale's and BSGR's proposals on the project since last year.
