Rio Tinto Secures Major Tax Break on Simandou Iron Ore Project

Rio Tinto’s Simandou Iron Ore Project Gains 17-Year Tax Incentive

Rio Tinto (ASX, LON: RIO) and its partners secured a major tax break for the Simandou iron ore project in Guinea. Regulatory filings confirm that Guinea’s ruling junta approved a 15% corporate tax rate for the next 17 years. This reduced rate applies to the railway and port infrastructure supporting the $23.5 billion development. It represents a sharp discount from Guinea’s standard 35% corporate rate and Australia’s 30% benchmark.

The Simandou project aims to produce 120 million tonnes of high-grade iron ore each year. Rio plans to begin first shipments in November. This concession provides crucial cost relief as the Guinean government demands more local investment. Officials may require Rio to build a domestic refinery to process the ore. The new tax terms follow earlier 2014 agreements, which included an eight-year tax holiday and a 30% rate after that.

Simandou Infrastructure Key to Global Iron Ore Strategy

The filings from Rio Tinto’s partners, Winning and Baowu, reveal that the 15% tax rate will apply to La Compagnie du TransGuinéen (CTG) — the entity operating the 600-kilometre railway and Atlantic port. After the 17-year period, the tax rate will increase to 25%, still below Guinea’s statutory 35%. CTG, formed in March 2022, is 42.5% owned by Rio and its four Chinese partners.

Rio Tinto first entered Simandou in 1997. Since then, the project has endured political instability, including two coups and multiple regime changes. Despite delays, the project is moving forward with Rio set to operate one of the two mines. Meanwhile, the full tax implications during the initial eight years of mining remain unclear, though some payments will occur, as filings suggest.

SuperMetalPrice Commentary:

Rio Tinto’s tax deal on Simandou marks a critical inflection point in iron ore development strategy. With global demand for high-grade iron ore rising, these tax concessions enhance project economics and de-risk the $23.5 billion investment. Guinea’s willingness to offer long-term tax incentives shows a strategic shift to attract foreign capital despite political complexities. Investors and supply chain stakeholders should watch the project closely as first shipments near, potentially reshaping global iron ore flows and pricing dynamics.