Rio Tinto’s Simandou mine could blow $10b hole in the federal budget

Rio Tinto’s Simandou mine in West Africa, which is expected to add 60 million tonnes of iron ore supply and weigh on global prices of Australia’s key export, could reduce government revenue by $10.5 billion as mining tax income falls. The $35 billion development of the Simandou mountain range in Guinea is considered a threat to the supremacy of Western Australia’s Pilbara region in the global production of iron ore. It is also likely to make Treasurer Jim Chalmers’ job of balancing the budget more difficult. The development of a $35 billion new mine in West Africa will have significant impacts on the iron ore price, and as a result, the Australian government budget. Bryan Cook “Simandou has long been considered the dagger to the heart of Australia’s iron ore exceptionalism,” independent economist and budget expert Chris Richardson said. “If nothing else, it would bring prices down and take away some of the super profits.”

Simandou is expected to operate at full capacity, producing 60 million tonnes of iron ore, by 2028 or 2029. A nearby rival mine developed by the Singapore-based Winning consortium will also begin producing 60 million tonnes per year around the same time. The extra supply is expected to weigh on iron ore prices, with analysts predicting falls of between $US12 and $US30 per tonne within the next five years, from the current price of $US103. Citibank has forecast a long-term iron ore price of $US85 per tonne, while RBC Capital Markets predicts it could fall to $US75 per tonne by 2028.