China Baowu plans to invest about $1 billion in the development of Simandou

The company raised $1.4 billion by issuing three-year bonds. 70% of the capital is invested in an iron ore project in Guinea

The world’s largest steelmaker, China Baowu Steel Group, has raised 10 billion yuan ($1.4 billion) through a bond issue, partly for the large-scale Simandou iron ore project in Guinea. Nasdaq reports this with reference to the company’s report on the Shanghai Stock Exchange.

The capital raised through the issuance of three-year fixed-rate bonds with an annual coupon rate of 2.45% will be used for operating expenses, including debt repayment, working capital, and project construction. At least 70% or about $1 billion of the capital raised will be used to expand the northern blocks of Simandou.

The field is divided into four blocks. WCS (45% controlled by Singapore’s Winning International Group and 35% – by Weiqiao Aluminum, a unit of China Hongqiao Group) owns 85% of the shares in the northern part of Simandou – blocks 1 and 2. The southern part of the project, blocks 3 and 4, is being developed by the multinational corporation Rio Tinto and a joint venture of China’s Chinalco and Baowu. The project is expected to become the world’s largest mine with a high iron ore content.

According to Baowu, the entire Simandou project will be completed and put into operation in 2026.

As GMK Center reported earlier, Guinea announced a tender for the development of the world’s largest iron ore deposit, Simandou, in the summer of 2019. The country cannot develop the mine on its own due to the high cost of developing the necessary infrastructure and protracted legal disputes. The deposit’s reserves were estimated at 2 billion tons of high-quality ore.

Baowu Steel teamed up with a Singaporean consortium to develop the Simandou project in September 2022. Iron ore mining in Guinea is one of China’s bets on reducing its dependence on iron ore suppliers in Australia and Brazil.

In March 2023, the Guinean authorities and Simandou shareholders agreed on the terms of joint iron ore mining. According to Rio Tinto’s Lawrence Deschambenois, the Simandou project has never been so close to being realized.