(Yicai) July 21 -- China Merchants Energy Shipping, which operates a vast fleet for global energy and commodity transportation, said its Hong Kong subsidiary will sign a long-term deal to ship iron ore from Guinea's Simandou project, the largest mining venture in African history.

Hong Kong Ming Wah Shipping will provide China Mineral Resources Group International Supply Chain, which has the exclusive right to ship iron ore from Simandou, with tonnage charter services for seaborne shipments of the ore, its Shanghai-based parent firm announced at noon today.

Hong Kong Ming Wah has already shipped about 600,000 tons of iron ore from Simandou since the mine began production last November. Under the new agreement, which China Merchants Energy said will formalize a long-term partnership between the two parties, freight rates will be linked to Baltic Exchange shipping indexes and adjusted through a cost-based mechanism.

Shares of China Merchants Energy [SHA: 601872] closed 3 percent higher at CNY14.72 (USD2.17) each today. The Shanghai Composite Index rose 1.8 percent.

Simandou is a vast open-pit hematite mine located in the Kérouané prefecture of southeastern Guinea, with proven reserves of around 4.4 billion tons of high-grade iron ore containing over 65 percent iron content. Upon completion, the project will be able to produce 120 million tons of the ore per year.

Developed in phases in two separate block, only the northern block has gone into production so far. The entity developing the northern block is controlled by China Baowu Steel Group, while the southern block’s developer is majority-owned by Rio Tinto, with Aluminum Corporation of China a key minority shareholder.

Even though the two blocks have different stakeholders, both have granted full general supply chain contracting rights for iron ore exports to China Mineral Resources Group International Supply Chain.

Editor: Futura Costaglione