Where next for Rio Tinto shares as it brings forward Simandou iron ore output?
Rio Tinto has brought forward the start of output from its Simandou iron ore project in Guinea to 2025. IGTV financial analyst @AngelineOng looks at why the project is such a big deal to the mining giant’s growth ambitions.
(Video Transcript)
Rio Tinto’s shares up 2%
Rio Tinto has decided to bring forward the start of production from its giant Simandou iron ore projects in Guinea to 2025, a year earlier than expected. This is interesting because Simandou is said to be the world's biggest and highest-grade new iron ore mine.
It will add around 5% to global seaborne supply when it comes online, and first production is expected to ramp up over 30 months from 2025 to an annualised capacity of 60 million tonnes per year.
Rio Tinto owns two of four Simandou mining blocks as part of its Simsa joint venture with China's Chalco Iron Ore Holdings and the government of Guinea. Of these 60 million tonnes, Rio Tinto's share will be 27 million tonnes.
Rio to invest $6.2bn to develop Simandou
Now, this has a cost. Initial capital allocation amounts to $6.2 billion to develop the mine, rail and port infrastructure. Rio Tinto will have to ramp up capital expenditure too. In 2023, the miners spent $7 billion on capex, of which $1 billion was gross capex.
In the next three years, its gross capex is estimated to be around $3 billion a year. Since mid-August, its share price has gained more than 20%, but hasn't quite recouped year-to-date losses. Currently, though, Rio's shares are up around 2%.
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