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Guinea Transitional Gov’t. Set to Strike Second Iron Ore Deal in a Week

May 9, 2010

Guinea set to seal fresh iron ore deal

By Tom Burgis in Lagos

Published: May 9 2010 22:36 | Last updated: May 9 2010 22:36

Guinea expects in the coming weeks to announce another significant iron ore deal to follow  Vale’s $2.5bn acquisition in the west African country, with Chinese investors considered the frontrunners.

Mahmoud Thiam, mining minister, told the Financial Times that he hoped a new joint venture involving Bellzone, an Aim-listed junior miner that says it has a “non-binding memorandum of understanding . . . with a Chinese enterprise” to exploit its prized Guinean concession, will be announced within a month.

Iron ore has become the hottest of commodities amid voracious Chinese demand and following radical changes in March to the way big miners sell to steelmakers that allowed prices to soar. West Africa – home to some of the largest untapped stocks but also renowned for its volatility – is attracting feverish attention.

“The [Vale] mine would turn us into the third-largest iron ore exporter in a five to six-year period,” Mr Thiam said. “If the Bellzone mine comes online it will turn us into the largest iron ore exporter if both mines are going full throttle within 10 years.”

Bellzone says its Kalia deposit could initially yield 50m tonnes of iron ore a year. This is the same amount as Brazil’s Vale, the world’s biggest producer, hopes to mine in Guinea following its acquisition last month of a 51 per cent stake in a company controlled by Beny Steinmetz, the Israeli diamond-trading billionaire.

Nikolajs Zuks, Bellzone’s Australian founder, said: “We are in discussions with a number of groups. The interest is very high.”

Mr Zuks said Bellzone, which has spent about $75m exploring the Kalia deposit and last month raised $50m by listing on London’s junior market, hoped to find $900m to construct the mine from its own equity and debt.

The discussions with potential investors concerned plans for a railway, port and power plant that would cost $2.6bn, he said.

Mr Zuks put no deadline on the discussions and declined to name Bellzone’s suitors. However, he said the railway would form the first leg of a planned “trans-Guinea rail network”.

That network was one of a host of infrastructure projects announced last year as part of a $7bn alliance between Guinea and Hong Kong-based China International Fund. The CIF has not responded to requests to comment on the Guinean agreement, under which it is to receive oil and mineral rights.

In March, Anglo-Australian miner Rio Tinto sold a 47 per cent stake in Guinea’s Simandou iron ore deposit, considered one of the world’s richest, to China’s state-owned Chinalco for $1.4bn.

Last year Guinea’s military-led government stripped half of Simandou from Rio and awarded it to the Beny Steinmetz venture that went on to agree the Vale deal.

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