Q&A-The risks facing RUSAL in Guinea

* Political involvement in sector has diminished * Deputy junta chief pledges move to civilian govt * No reports of threats to RUSAL operations By Daniel Magnowski DAKAR, Jan 8 (Reuters) - World number one aluminium producer RUSAL is gearing up for an initial public offering in Hong Kong later this month. One of the key supply centres for its smelters is Guinea, a small West African country in the grip of severe political uncertainty since a failed attempt to kill its military junta leader in December. RUSAL says Guinea, which holds two-thirds of the world's bauxite deposits is of "high strategic importance" as it aims for self-sufficiency in raw materials. IS RUSAL ABLE TO OPERATE NORMALLY? The government banned RUSAL from exporting for almost a week in September during a tax dispute, but the other interruptions to, or reductions of output last year, were the result of strikes or RUSAL's own decisions. Junta chief Captain Moussa Dadis Camara was hostile toward foreign mining firms. But since he was evacuated to Morocco for treatment following a Dec. 3 assassination bid, political involvement in the mining sector has halted. This week, acting head of state Sekouba Konate said Guinea will move to civilian government which, if successful, would effectively take Camara out of the picture. A post-Camara administration may in time want to review mining contracts, but its highest immediate priority would be to hold the country together while preparing for elections. A RUSAL executive in Guinea said this week said investors would be reassured by a discussion with the government. HOW SECURE IS OWNERSHIP? A Guinean court said in September last year the sale of the Friguia alumina refinery in 2006 was illegal, and the Guinean state was retaking ownership on the grounds that RUSAL was charged significantly less than the plant's true value. Guinea left the door open for RUSAL to negotiate, and since then Friguia has operated as normal. There is little appetite and insufficient expertise within the Guinean administration to take over the running of a huge industrial operation. At the time it appeared to be no more than a means of extracting more cash from the Russian firm. Talk in Conakry mining circles in late-2009 suggested Guinea's gameplan was to include Friguia in a package of mineral and mining properties to be sold to a Chinese fund. But serious investors would be extremely unlikely to take on an asset whose ownership would immediately be disputed. Guinea's leverage with RUSAL, as with other mining firms, is limited. The most recent figures show bauxite production was down by more than 20 percent year-on-year in the first nine months of 2009, a fall which a Guineam finance ministry document seen by Reuters linked partly to instability in the country. With income from mining projects accounting for 80 percent of Guinea's foreign currency reserves, further upheaval would be damaging for public finances. Anger would grow in army ranks if wages could not be paid, and social unrest could mount if a weary, tense population is deprived of already poor public services and utilities. IS IT SAFE TO WORK THERE? Some expatriate mining executives, crucial to Guinean operations as there are few local employees with enough technical knowledge, have quit the country on security worries. Towards the end of 2009 there were local media reports of executives and diplomats from other African countries coming under attack in Conakry, but none of Western expats being targeted. RUSAL's operations are far from the capital, and there have been no reported incidents of violence against mineworkers, management or property. Mining companies are unlikely to expand or to commit extra money to Guinea while its political future is so uncertain, but there are no signs pre-existing operations are scaling back, or their owners preparing to quit the country. (Editing by William Hardy)