Rio Tinto in sweetheart tax deal with military junta

Rio Tinto and its Simandou iron ore partners will enjoy tax discounts of more than 50 per cent on crucial parts of their $35 billion plan to build an African rival to Australia’s most lucrative export industry.

Guinea’s ruling military junta has agreed for the mining giant and its partners to pay a 15 per cent corporate tax rate for the first 17 years of operation of the railway and port that will carry iron ore from the West African nation’s Simandou mountains to customers overseas.Workers at the Morebaya port in Guinea, where ore from Simandou will be shipped overseas. AFP

The rate is half the 30 per cent corporate tax rate paid in Australia by big companies like Rio, and well below the 35 per cent rate that normally applies in Guinea.

Revelations of the tax deal with Mamady Doumbouya, who took charge of Guinea in 2021 after a military coup, come as big business in Australia urges the Albanese government to rule out new taxes like the Productivity Commission’s proposal for a tax on corporate cash flow.

First iron ore exports are due in November from Simandou, where Rio, Singaporean company Winning International and Chinese steelmaker Baowu are collectively spending $US23.2 billion ($35.1 billion) on two new iron ore mines and more than 600 kilometres of railway and port infrastructure.
Updated: Sep 10, 2025 – 2.43pm. Data is 20 mins delayed.

Simandou has long been touted as a potential rival to the iron ore mines of Western Australia’s Pilbara region, where companies like BHP, Rio and Fortescue supply more than half the world’s seaborne iron ore and a big slice of federal revenue.

The high cost of building infrastructure to service the Simandou mines undermined previous attempts to develop the project, and the Guinean government has offered tax incentives to solve the problem.

Rio published the tax agreements it struck with the previous Guinean government in 2014, but has not revealed the agreements it and the other Simandou partners struck with Doumbouya’s unelected government in August 2023.

But Winning and Baowu have submitted documents to Singapore regulators that spell out the tax incentives offered for the Simandou transport infrastructure they will jointly own with Rio.

The documents implied that tax rates for the rail and port companies would start at 15 per cent for a 17-year period, then rise to 25 per cent after that, suggesting a lifetime tax discount compared to the normal Guinean tax rate of 35 per cent.

Rio’s consortium – which includes four Chinese companies – will own 42.5 per cent of “Compagnie du Transguineen”; the entity that will own and operate the railway that links the Simandou mines with the port.

Rio’s effective stake in “Compagnie du Transguineen” will be 22.5 per cent.

The tax agreement for the railway and port are different to the tax arrangements for the iron ore mines at Simandou.

Under the 2014 deal with the previous Guinean government, the Rio consortium’s mining company was set to get an eight-year tax holiday before paying a 30 per cent corporate tax rate thereafter.

Those arrangements were also changed after talks with Doumbouya’s regime. Rio has declined to comment on the changes, but it is believed the consortium will now pay some tax in the initial eight years of the mine.

Attempts to contact Winning International by email and phone were unsuccessful.

Ismael Nabe, Guinea’s minister of planning and international co-operation, travelled to Perth last week and said the West African nation was “stable” and open for business.

“When President Doumbouya came to power he made a very clear statement that all the agreements would be respected, and we respect them, but we’re looking to them to try to renegotiate for the betterment of the people,” Nabe said on the sidelines of the Africa Down Under conference.

He also said the Guinean government was keen for Rio and the Simandou partners to investigate ways to add more value to the nation’s iron ore through further domestic processing, rather than simply exporting the raw minerals.

Rio responded to Nabe’s comments by saying it was studying an option to turn Simandou’s ore into high-grade, higher-value pellets in Guinea.

The disclosures by Nabe and Rio caught the market off guard, helping to drive a rally in iron ore prices this week.

Australian ore with 62 per cent iron was fetching $US105.70 a tonne on September 8, according to S&P Global Platts; up from $US101.85 a tonne on September 1.

The ore mined by Rio at Simandou will contain about 65 per cent iron in the initial years, making it higher quality than most Australian ores. which contain between 55 per cent and 62 per cent iron.

Market prices for more processed forms of iron ore demonstrate the potential value gain if manufacturing costs can be kept low.

Iron ore concentrates containing 67 per cent iron were fetching $US132 a tonne in the Middle East on September 8, according to Platts. Those concentrates are typically turned into the sort of iron ore pellets that Rio is considering at Simandou.

The high-grade iron ore pellets made by Vale in Brazil were fetching $US163.42 per unit on September 8, according to Platts.