ANALYSIS-Guinea RUSAL dispute sends warning sign to miners

* Door open for RUSAL to negotiate with Guinea * Deals signed under former administration disfavoured * Gov't unlikely to throw out foreign investors By Saliou Samb and Daniel Magnowski CONAKRY, Sept 16 (Reuters) - Resources firms with operations in Guinea will be unsettled by a court decision to rescind a deal with RUSAL, but even a jumpy Guinean administration is unlikely to throw out the economically vital miners. A court in the world's biggest bauxite exporter said last week the 2006 sale of the Friguia alumina refinery to Russian metals giant UC RUSAL was unlawful, and the Guinean state was retaking ownership of its largest industrial operation. Since then, the government has said it is open to talks with RUSAL, the world's biggest aluminium producer, about the deal. The court's decision is the latest in a string of disputes between the government set up by Captain Moussa Dadis Camara, who took power in a December military coup after the death of then President Lansana Conte, and the foreign mining firms that work in the poor West African country. Government rhetoric has become increasingly confrontational in recent weeks after an easing of its aggressive stance earlier this year, but behind the scenes there is room for maneouvre. "I think the government will not break completely with RUSAL, for practical reasons," said a RUSAL official in Guinea, speaking on condition of anonymity. "The government knows that if it ruptures brutally with RUSAL, it will have problems selling alumina, and above all taking over all the costs of the plant," he said. "That makes me believe that the government wants more money in this case." Guinea has repeatedly referred to the discrepancy between the price for which Friguia was sold by the Conte administration, and what it says is an independent valuation. "For the moment, we've only calculated the loss made in the sale of the plant to be the difference between $22 million (sale price) and the $250 million estimated to be the minimum real value of the plant," said Al Hassen Onipogui, minister of economic control, speaking this week on national television. The signs in Conakry are that the government would welcome a financial settlement, rather than take over a massive refinery. "The sale was illegal ... and our partners know that Guinea was totally wronged," said Mines Minister Mahmoud Thiam, seen as a moderate voice in Camara's inexperienced, sometimes erratic government. "(RUSAL) know they can contest the judgment, but they can also come to the negotiating table and discuss it with us," he told Reuters in a telephone interview. POLTICALLY MOTIVATED The company maintains it is legally entitled to the 52,000-tonne per month refinery, while Russia has responded by accusing Guinea of trying to "expropriate" RUSAL property and said it threatened Russo-Guinean relations. Still, diplomatic outrage may conceal a willingness to do business. "I think RUSAL has understood, because at a higher level, we have had contact which leads us to believe that they are ready to negotiate," Thiam said. The government's motivation for taking on RUSAL may be political as well as financial. Camara has seen opposition towards his National Council for Democracy and Development (CNDD) grow in the past month as speculation intensifies that he will stand in presidential elections early next year. By setting out his stall as champion of the national interest, Camara is seeking to win back some of the support his junta garnered in its early days of power. "It's strategic for the junta to take control of something so important for the coutry and sell it on their own terms," said Rolake Akinola, West Africa analyst for Control Risks, a London-based political and investment consultancy. For firms such as world number two iron ore miner Rio Tinto and world number three gold miner AngloGold Ashanti, which signed contracts under the Conte government, there may never be true security. "Commercial interests will come into the calculation, but this reinforces the risk of contractual instability," Akinola said. "The key factor against mining firms is that deals were struck under Conte." What happens next in the RUSAL dispute is likely to set the tone for investment in Guinea in the near future. "Everything depends on the way in which this dispute is solved, because right now the signal sent out by the authorities is not good for investors, who may fear finding themselves in the same situation as RUSAL," the RUSAL source said. Even if Camara would prefer to take a harder line, the economic reality that mining firms are responsible for around 70 percent of exports limits his options. "The government will only push so far," said Control Risks' Akinola. "They've not driven anyone out of the country." (Reporting by Saliou Samb in Conakry; Writing and additional reporting by Daniel Magnowski in Dakar; Editing by Keiron Henderson)