China’s Baosteel expects Simandou mine to start production by 2025

China’s largest steelmaker, Baoshan Iron & Steel (Baosteel), expects to complete infrastructure construction and produce the first iron ore at the Simandou deposit in Guinea by the end of 2025. The company announced this during a briefing on its third quarter results.

The project, located in southeastern Guinea, has an annual production capacity of 120 million tons. It will become the world’s largest deposit of high-grade iron ore, a key raw material for the green transition in the global steel production chain.

The Simandou deposit is divided into four blocks, two of which are being developed by a consortium involving Winning International Group from Singapore, China’s Weiqiao Aluminum (part of China Hongqiao Group) and United Mining Suppliers. In June 2024, following the transfer of rights to a stake in the Winning Consortium Simandou (WCS), Baosteel became the main shareholder in the project.

“Thanks to the rich, high-quality resources and favorable mining conditions at Simandou, production costs will be relatively competitive,” the company said.

Baosteel is a unit of the state-owned China Baowu Steel Group, the world’s largest steel producer by production. In addition, the company is actively investing in green technologies. Its zero-carbon plant is being built in Guangdong province, in southern China, using green hydrogen and electricity generated from renewable sources. The 4.5 billion yuan (approximately $631 million) facility is also scheduled to be completed in 2025.

Despite the large-scale projects, Baosteel reported a significant drop in profits. In the third quarter of 2024, the company’s net profit fell by almost 65% due to falling steel prices. However, export orders for the first three quarters reached a record high of 4.66 million tons, approaching the annual target of 6 million tons.

The Simandou project, which is strategically important for China, should help Baosteel reduce its dependence on ore imports, reduce its carbon footprint in the steel industry and strengthen its competitive position in the international steel market.

As GMK Center reported earlier, Simandou deposit reserves reach 4.41 billion tons of iron ore in four areas. WCS owns the northern part of the mine (blocks 1 and 2), where China Baowu will be the main developer of the deposit. The other two blocks are owned by Rio Tinto through its Simfer joint venture with China’s Chalco Iron Ore Holdings and the government of Guinea.

The project is progressing slowly due to infrastructure construction. In 2022, the government of Guinea, Winning Consortium Simandou (WCS), and Rio Tinto Simfer established La Compagnie du TransGuinéen (CTG) to jointly build rail and port infrastructure. Simfer and WCS each own 42.5% of the shares, and the state owns 15%.

According to Gahigi, Simandou can increase Guinea’s GDP by 50%, as it is estimated that the country will receive an additional $2-3 billion from the project from 2030.