Rio Tinto, partners score major tax break on Simandou

Rio Tinto (ASX, LSE: RIO) and its partners in Guinea’s Simandou iron ore project have reportedly secured corporate tax concessions worth more than half off the standard rate for key parts of their $23.5-billion (C$32.5-billion) development, regulatory filings show.

Guinea’s ruling junta has approved a 15% corporate tax rate for the first 17 years of operations at the railway and port that will transport Simandou ore to global markets, the Australian Financial Review reports. That is well below Guinea’s usual 35% rate and less than half the 30% paid by major firms in Australia.

News of the deal come just days after the government signalled Rio Tinto may be required to build a local refinery for the mine, which is designed to produce 120 million tonnes of iron ore annually and ship its first cargo in November.

Rio disclosed its earlier tax agreements with Guinea’s former government in 2014, which included an eight-year tax holiday followed by a 30% rate. The company has not published the revised terms negotiated with the current junta.

The two rival partners that control Simandou’s blocks one and two: Winning Consortium — which includes Singapore-based Winning International and China Hongqiao — and state-owned China Baowu Steel; filed documents in Singapore outlining the incentives for infrastructure they co-own with Rio Tinto, first offered to them in August 2023. The filings indicate the Rio-led consortium will still pay some tax during the first eight years of mining, though the structure remains unclear. Rio has declined to comment.

TransGuinean company

The documents submitted by Winning and Baowu suggest the tax rate for the railway and port companies will rise to 25% from 15% after 17 years, still below Guinea’s statutory 35%.

Rio’s consortium, which includes four Chinese partners, holds nearly 43% in La Compagnie du TransGuinéen (CTG), the entity managing the 600-km railway and deep-water port on Guinea’s Atlantic coast. CTG was incorporated in March 2022.

Rio Tinto first secured an exploration license for Simandou in 1997. Since then, the project has weathered two coups, four heads of state and three presidential elections. Development is now advancing, with Rio set to operate one of the project’s two mines.