By Helen Reid
JOHANNESBURG (Reuters) - Rio Tinto (NYSE:RIO) and a Chinese-backed consortium risk losing their mining licences if they fail to meet a tight construction timeline for the Simandou iron ore mine in Guinea, the West African country has said.
Guinea's government has grown increasingly impatient with the mining firms that control the giant Simandou deposit which has not been developed since Rio was first granted an exploration licence for it 25 years ago.
The ruling junta signed an agreement on Saturday with Rio Tinto and Winning Consortium Simandou (WCS) under which the firms will collaborate on a 670-kilometre (416 mile) railway and a port to get Simandou's high-grade ore to market.
"The framework agreement gives Guinea a very precise calendar with significant penalties up to and including the withdrawal of the mining licence, for any mining company that does not respect its commitments," Guinea's presidency said in a video statement on Twitter (NYSE:TWTR) on Monday night.
The threat to withdraw the licences has not previously been reported. Rio Tinto declined to comment on the penalties and WCS did not immediately respond to a request for comment.
Guinea's mines minister has said the railway and port infrastructure must be completed by the end of 2024, and commercial production must start by March 31 2025, a timeline analysts say is ambitious for a project with significant environmental and social impacts to navigate.
"The worry for investors is that this ultimatum may incentivise the developers to cut corners," said Eric Humphery-Smith, senior Africa analyst at Verisk (NASDAQ:VRSK) Maplecroft.
Rio Tinto's chief executive of copper, Bold Baatar, has said the framework sets out how the project will be built to international Environmental, Social, and Governance standards. Rio Tinto declined to provide details.
Rio Tinto owns a 45.05% stake in the southern half, Blocks 3 and 4, of Simandou, with Aluminium Corporation of China (Chinalco) holding 39.95% and Guinea's government the remaining 15%. SMB-Winning - the consortium behind WCS - won a government tender in November 2019 for Blocks 1 and 2.
Chinalco did not immediately reply to a request for comment.