Chinese tycoons plan to take Guinea mine Simandou from Rio Tinto

A SECRETIVE group of Chinese tycoons is plotting to take away the world's largest undeveloped iron ore project from Rio Tinto.

The swoop by China International Fund (CIF), set up by a syndicate of Hong Kong traders and Sonangol, Angola's state oil monopoly, is the latest turn in the fight over Simandou, an ore reserve that will turn Guinea in West Africa into the world's third-largest iron ore producer after Australia and Brazil.

Rio Tinto last year paid $US700 million to the Guinean government to recover rights to half the project after they were taken away by the previous regime. The other half was snapped up by Beny Steinmetz, a billionaire Israeli diamond trader, who then sold a stake to Vale of Brazil, landing him a multi-billion-dollar paper profit.

Rio plans to spend at least $US10 billion ($9.8bn) to develop its side of Simandou with its partners Chinalco, Beijing's state aluminium company, and the International Finance Corporation, an arm of the World Bank. CIF, however, has made its own pitch for the project. The group is the second-biggest investor in Bellzone, a London-listed miner with a small iron ore development in Guinea, after chief executive Nik Zucks.

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In a presentation seen by The Sunday Times, CIF and Bellzone promise to develop the project, despite Rio already having rights to it. "The Simandou deposit is currently a massive unrealised potential for the Guinean people and their economy and should have been developed," the presentation said. "This deposit will be developed by CIF and its partner Bellzone."

The presentation was dated last August, four months after Rio announced its binding contract with the Guinean government to develop the mine. The plan includes the construction of a railway corridor across the country.

CIF and Bellzone promise to do the same and offered $US700m in cash as "prepayment of mining tax and profit", the same amount as Rio.

When asked by The Sunday Times last week if he was trying to take over Simandou, despite Rio's contract, Mr Zuks said: "What's wrong with that?"

CIF has deep pockets. It is a trading group that sits between Angola -- the largest source of China's crude oil supplies besides Saudi Arabia -- and Beijing. The oil deals are worth billions of dollars a year.

CIF provides infrastructure in exchange for commodities. It drew scrutiny in 2009 when it announced a $US7bn infrastructure-for-commodities arrangement with opaque terms.

Under its Simandou proposal, it promises to turn Guinea into a natural resources powerhouse by linking various rail lines into a giant new line running from neighbouring Mali to the coast.

Rio declined to comment.