Rusal seeks help over mining dispute

Rusal is preparing to seek international arbitration after Guinea demanded that it hand back ownership of one of the country’s largest industrial operations and accused the Russian aluminium group of owing the country $750m. The dispute is the most explosive to emerge from the efforts of the mineral-rich west African nation’s military government to glean better terms from mining deals struck under Lansana Conté, whose 24 years of autocratic rule ended with his death in December. For Rusal, the aluminium empire of Russian tycoon Oleg Deripaska, the stand-off is a blow to its attempts to secure resources in the country under which lies two-thirds of the world’s bauxite, the ore used to make aluminium. Following a Guinean court’s ruling earlier this month that invalidated the 2006 privatisation of the Friguia refinery to Rusal, Mahmoud Thian, minister of mines, told the Financial Times that the government expected the company to hand back all ownership documents to the state but that it could continue to operate the plant. Mr Thian said Rusal paid only $22m for an asset that had been independently valued at between $250m and $350m. He added that Rusal had failed to pay “a large portion” of taxes, royalties and other duties since it began to operate the refinery under a rental agreement in 2002, according to government audits. Coupled with the alleged underpayment in the privatisation, Mr Thian said the total sum outstanding was $750m. Both the minister and Rusal said they had entered into negotiations over the dispute. Rusal is also appealing the Guinean court’s ruling, a person familiar with the matter said, and “strongly considering” taking the dispute to arbitration in Paris under the terms of the privatisation contract. “We have no doubt that we are the legal owner and we are going to prove it,” Rusal said. “We are not aware of any audits referring to $750m of outstanding payments. The information that we paid $22m [in the privatisation] is incorrect.” The group said it has invested $400m in the operations since 2002 and provided services to nearby communities. The government is also reviewing other mining agreements. In July Rio Tinto was obliged to surrender part of its iron ore concession. Following pressure from the government, AngloGold Ashanti, the South African gold miner, has agreed to set up a $10m fund to cover environmental liabilities at its Guinean mine. .Copyright The Financial Times Limited 2009. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.