Guinea junta warns Rio of smelter cost whack

Rio Tinto (ASX: RIO) may be forced to make expensive downstream investments in Guinea as the military-led government pushes for local refining tied to the giant Simandou iron ore project.

Authorities in the West African nation, which seized power in 2021, have demanded that miners present firm plans to build domestic processing facilities. Officials argue that smelters and refineries are essential for Guinea to capture more value from its resources and to drive broader economic development.

Guinea’s minister of planning and international cooperation, Ismael Nabe, told the Australian Financial Review the strategy is clear: ore mined in the country must also be processed there.

The policy echoes a broader resource-nationalism trend across Africa, where governments are pressing companies to process minerals locally. In Guinea, the world’s second-largest bauxite producer, the government has already cancelled agreements with some miners, including Emirates Global Aluminium, over slow progress building alumina refineries.

Shares in Rio Tinto rose 0.8% to close at A$118.21 apiece in Sydney on Monday, valuing the company at A$164 billion (C$150 billion). 

Four blocks

The Simandou is divided into four blocks. Winning Consortium Simandou, backed by Chinese firms including steelmaker China Baowu Steel Group, controls blocks on and two. Rio Tinto and Chinese state-owned Chinalco control blocks three and four.

Nabe compared Guinea’s ambitions to Western Australia’s iron ore mining boom decades ago, stressing that mining revenue should also support agriculture, education, and infrastructure.

Despite tighter regulations, Guinea’s bauxite exports rose 36% to a record 99.8 million tonnes in the first half of 2025, fuelled by Chinese demand.

The country exported over 130 million tonnes last year and holds reserves estimated at 7.4 billion tonnes, according to the US Geological Service.

Highest grade

Simandou is expected to become the world’s largest and highest-grade new iron ore mine, eventually producing 120 million tonnes of premium ore annually. First ore is scheduled for November.

Rio Tinto first secured an exploration license for Simandou in 1997. but political instability has slowed progress. The project has outlasted two coups, four heads of state, and three presidential elections.

Development includes a 600-km rail line linking the Simandou mountains to a new deep-water port on Guinea’s Atlantic coast. Rio Tinto will operate one of the two mines feeding the project.