By Richard Bardon
After years of delays, the giant Simandou iron mine in Guinea, west Africa is set to begin shipping ore by the end of this year, and to be operating at full capacity sometime late in the next. Once that happens, Western Australia’s role as the world’s dominant supplier of high-grade iron ore will end; and thanks to the very high purity of Simandou’s ore, the demand for Queensland coking coal will also be dramatically reduced. Given iron ore and coal are Australia’s two largest and most profitable exports by far, from a conventional perspective this sounds like an economic disaster in the making. From a real, physical-economic perspective it will (or at least ought to) be the best thing to happen to Australia in ages: the perfect opportunity for the next federal government, of whatever stripe, to break the so-called “resource curse” of lazy reliance upon raw materials exports, and return to local valueadding and domestic manufacturing—as both major parties say they want to do.
Simandou, located in the mountain range of the same name in south-eastern Guinea, is the largest known untapped iron ore reserve in the world, comprising an estimated 1.9-2.4 billion tonnes across two adjacent ore bodies. It is also of the highest quality, at an average 65 per cent iron metal (Fe), equal to or better than anything found in the Pilbara region of WA. (Industry website Mining Data Online reports that WA ore averages 53 per cent Fe, albeit export grade starts at 60 per cent, of which there is plenty to be going on with for at least several decades.) While Simandou’s projected average output of 60 million tonnes (mt) a year is an order of magnitude too small to eclipse the Pilbara’s (which was 328 mt in 2024), various analysts have warned that it will be enough to lower world prices such that many operations in WA become economically unviable; hence its nickname, “the Pilbara killer”. The Pilbara’s problem is sharpened by the fact that Simandou is three-quarters owned by Chinese state-owned companies, and its entire output is reportedly slated for Chinese steelmakers that currently source their ore from WA. (The other quarter belongs to Anglo-Australian corporation Rio Tinto, which is reportedly quite content to cannibalise its own Pilbara sales if the price is right.)
Queensland’s problem is that China, in its unending quest for greater efficiency and environmental friendliness in all its industries, is or soon will be switching many of its steelmakers from traditional blast furnaces to electric-arc furnaces (EAFs). And as David Llewellyn-Smith of economics blog MacroBusiness noted 26 February, “Simandou produces such highquality iron ore that it can and will be used as direct injection feedstock into [EAFs]. These typically use gas, not coking coal, as the reducing agent. If all of Simandou output is used in EAFs, then 60 mt of coking will be displaced. This is pretty much all current Chinese coking coal imports and around 17 per cent of current global seaborne supply. The coking coal price will be demolished” (emphasis added). Australia is the world’s biggest exporter of coking (or “metallurgical”) coal, mostly from Queensland’s Bowen Basin. Citing Queensland and federal government projections of tax and royalty revenues to 2028, Llewellyn-Smith added bluntly: “The QLD government is not prepared for a price accident of this magnitude. I can see coking coal at one-third outlook prices over the next three years. This is well north of $10 billion gone over forward estimates.” And that is not even to mention the chaos a collapse of coalmining would wreak upon the many communities (including major regional centres) that depend upon it for their livelihoods.
Build the Iron Boomerang
Project Iron Boomerang is needed so Australia’s economy can adjust to the Simandou iron ore mine starting production. Photo: Shane Condon
Most Australian economists, pundits and politicians have been in a sort of denial about Simandou ever since the ore bodies were first explored by Rio in 1997. They were seemingly convinced it would never happen at all by years of delays due to bribery and corruption scandals (some genuine, others apparently engineered by US authorities to sabotage the project), legal actions between various companies involved, engineering challenges (mainly to do with the 650 km railway from mine to port, through difficult mountainous terrain), and of course a global pandemic. But rather than panic now that it is happening, Australian governments could easily arrange to use the unsold iron and coal here instead—as we should have been doing all along anyway.
A detailed plan to do just that, called “Project Iron Boomerang”, has been available to the federal, Queensland and WA governments for well over 20 years. The brainchild of Queensland engineer Shane Condon, the scheme entails building a heavy duty, double-track railway across the continent to bring Pilbara iron ore to Queensland and Bowen Basin coal to WA, with steelmaking complexes in Port Hedland (WA) and Abbot Point (QLD) producing 22 mt of primary (first stage) steel each, for export and domestic use. As Condon explained in a September 2020 interview for the Australian Citizens Party’s Citizens Insight series, currently the ships that carry iron ore and coal from Australia, which are the world’s biggest bulk carriers, sail thousands of nautical miles to steel plants in China, Japan and Korea, and return empty. That, plus the fact that that iron ore is ~60 per cent metal and 40 per cent waste, means the current process is only 30 per cent efficient. Solving these inefficiencies (and eliminating that of shipping finished steel products back again) by making steel here would save billions of dollars, create an estimated 50,000 jobs during construction and 35,000 permanent jobs in operation, drive the reindustrialisation of Australia, and help meet the large and growing demand for steel of developing countries in our region and beyond—starting right next door with Indonesia, which requires some 100 million tonnes of steel just for projects already planned over the next few years.
As of 2020, the estimated total cost to build Iron Boomerang was $70 billion; less than one fifth of what Australia has pledged to the USA and Britain for nuclear-powered submarines to make war upon our neighbours instead of all getting rich together.
Australian Alert Service, 5 March 2025
