Glencore has cleared a key hurdle in its ambition to become an iron ore miner, reaching a preliminary deal with the west African country of Mauritania for a $1bn contract for access to railway and port facilities.
The commodities giant is keen to expand into iron ore, a key ingredient of steel and a vital source of profits from rivals Rio Tinto, BHP Billiton and Vale of Brazil. The trader is seeking to develop three big projects in Mauritania, two in partnership with state-controlled miner Société Nationale Industrielle et Minière, which has exclusively exported the mineral from the country since the 1960s.
The railway contract is one of the three key obstacles to build the remote Askaf mine. Although Mauritania, which relies on iron ore for half its exports and a quarter of its tiny $4bn economy, wants to boost iron ore production, the two parties have spent two years negotiating access to railway.
Initially, SNIM asked Glencore far too high a price for access to its railway for the next 20-25 years, according to people familiar with the negotiations. But recently both sides reached a preliminary deal, pending some final discussions.