Rio Tinto Seeks Talks With Guinea’s Military Junta

Dec. 29 (Bloomberg) -- Rio Tinto Group, which is considering the construction of a $6 billion iron-ore project in Guinea, said it will seek talks with the country’s military junta over plans to revise mining contracts. “We will initiate good-faith contact with the new authorities in order to answer any questions,” Jordan Feilders, a spokesman for Rio in Conakry, the Guinean capital, said in an e-mailed statement late yesterday. The junta, led by Captain Moussa Dadis Camara, which took control of the country on Dec. 23 after President Lansana Conte died, plans to cancel mining agreements. Alcoa Inc., United Co. Rusal and AngloGold Ashanti Ltd. also have operations in the country while BHP Billiton Ltd., the world’s largest mining company, is building an alumina refinery with Global Alumina Corp. Mining companies “are likely to face severe pressure over the coming days and weeks to accede to all manner of extortionary requests by the new military regime,” Sebastian Spio-Garbrah, an analyst at New York-based political research firm Eurasia Group, said in e-mailed note to clients. Crew Gold Corp., a Vancouver-based gold producer, said it temporarily halted mining at its Lefa operation in Guinea on orders from the government. Messages left on the company’s phone weren’t immediately returned. AngloGold is still operating its Siguiri mine, Alan Fine, a spokesman for the company, said from Johannesburg today. Mining Rights “Our understanding of the situation is that the authorities have said they are going to cancel all operations where mining rights have been obtained under the table, and that doesn’t apply to us,” Fine said in a separate interview yesterday. Crew fell 0.03 krone, or 7 percent, to close at 0.4 krone (6 U.S. cents) in Oslo. Rio rose 5.5 percent to 1,450 pence ($21.13) in London and AngloGold gained 3.5 percent to 257 rand ($27.20) in Johannesburg. Alcoa fell 1.2 percent to $9.6637 as of 12:26 p.m. in New York trading. Global Alumina rose 9.8 percent to C$0.45 ($0.37) in Toronto. Guinea, a nation of 9.4 million people, has the world’s biggest reserves of bauxite, an ore used to make aluminum. The country produced 14 million metric tons of bauxite last year, according to the U.S. Geological Service. Guinea also has deposits of gold and diamonds. ‘Credibility Was Suspect’ Randgold Resources Ltd., owner of two gold mines in neighboring Mali, has looked at investing in Guinea for 10 years and decided against doing so because the government’s “credibility was suspect,” Chief Executive Officer Mark Bristow said today in a telephone interview from Jackson Hole, Wyoming. A new regime may be positive for Guinea, should it bring an accountable government with clear mining legislation and democratic elections, Bristow said. “That’s why countries like Mali, Senegal, the Ivory Coast and Tanzania fit our investment criteria,” he said. Rio holds rights to part of the Simandou ore deposit and was in a dispute with Conte’s government after some concessions were given to BSG Resources Ltd., a company controlled by Israeli mining investor Beny Steinmetz. “Our legal agreements with the government represent a win- win situation for the development of the Simandou project that benefits the people and the government of Guinea and our company,” Rio’s Feilders said. BSG Concessions Marc Struik, the chief executive officer of the mining division of BSG, didn’t immediately respond to a message left on his mobile phone. He said Dec. 18 that Rio was deprived of Blocks 1 and 2 of the Simandou site because “the law of the land is if you don’t use it you lose it.” BSG already held other concessions adjacent to those of Rio. Rio disputes the assertion it hasn’t carried out work on the site, saying that even though its concessions cover 739 square kilometers (285 square miles), compared with BSG’s 3,333 square kilometers, it has undertaken 78 times as much drilling and completed 46 times as many exploration sites. Rio employs 1,800 people in Guinea compared with BSG’s 500, Rio said in an e-mailed document, citing data presented at a mining conference in October and information available on the Internet. NRW Holdings Ltd., an Australian mining contractor, said today it’s still working for Rio at Simandou, which is 800 miles (1,300 kilometers) from Conakry. Rio Tinto Alcan, the aluminum unit of Rio, also has interests in the country. Alcoa Venture Alcoa’s operations in the country haven’t been disrupted, said Kevin Lowery, a spokesman for the New York-based company. Alcoa owns 45 percent of Halco Mining, a venture with Rio Tinto Alcan and minority partners. Halco owns 51 percent of Cie. des Bauxites de Guinee, a bauxite-mining operation. The rest is owned by Guinea’s government. Rusal spokeswoman Vera Kurochkina and Illtud Harri, a spokesman for BHP in London, declined to comment. Michael Cella, a spokesman for Global Alumina, didn’t immediately return a message left on his office phone.