Guinea accuses Rio Tinto of threat to civil peace

The Government of Guinea has accused Rio Tinto of defying its authority and potentially destabilising civil peace. In an unusually blunt rebuke, the West African nation has told the mining group in a letter to stop trying to regain concessions for a multibillion-dollar iron ore deposit. The letter was addressed to Tom Albanese, the chief executive, and Jan du Plessis, the chairman, on June 26 and marks an escalation in tensions between the world’s second-largest miner and Guinea. It calls into question the future of the Simandou iron ore mine, one of Rio’s most important development projects. Rio has estimated that it will cost at least $6 billion (?3.6 billion) to develop Simandou, but the mine has the potential to become one of the world’s largest sources of iron ore, the raw material used to make steel. Rio’s confrontation with Guinea comes as the company also faces difficulties in its relationship with China after four employees were arrested and accused of spying during negotiations over iron ore contracts. Relations between Rio and China were already tense before the arrests after Rio had rejected a $19.5 billion investment by Chinalco, the state-owned metals group, in favour of a rights issue. Rio’s problems in Guinea began last December, when the Government revoked half of the Anglo-Australian miner’s licences for Simandou. Rio challenged the decision and has refused to move its equipment, including a drilling rig, from the disputed territory. Mahmoud Thiam, the Mines and Energy Minister, said in his letter to the mining group’s executives: “We regret to observe that Rio Tinto seems to ignore this sovereign decision from our Government with a doggedness verging on defiance of the authority of the State.” The letter goes on to accuse Rio of a subversive campaign against the Government. It adds that “such activities come dangerously close to destabilising civil peace and weakening our socio-economic balance”. “We hold — I say it again — palpable proofs of these acts and we are currently examining the different means at our disposal to sanction them,” Mr Thiam adds. Rio rejected the allegations. The company said: “Rio Tinto has in all its actions, public statements and letters to the Government of Guinea indicated its desire to conduct good-faith discussions. Rio Tinto is confident of its strong legal standing as well as the win-win nature of our agreements with Guinea for the development of this project. We remain optimistic about the findings of any fully independent review of the Simandou issue.” Mining analysts believe that the Guinean Government became frustrated by the slow pace of development at Simandou. Rio’s licences have been given to another company, BSG Resources, which is owned by Beny Steinmetz, an Israeli diamond and mining mogul. One analyst said: “There are all sorts of rumours about what the Guinean Government is really doing. It is certainly intriguing that BSG, a relatively small company, got the licences.” While Rio has said that developing Simandou will cost at least $6 billion, some estimates have suggested that $12 billion will be required. The mining operations will be expensive to construct because they are in a mountainous region and a 750km railway will be needed to transport the iron ore to the coast. Rio has spent $500 million on exploration and development at Simandou, but expenditure has fallen from $40 million a month to $10 million because of the economic slowdown and the collapse in commodity prices. source:business.timesonline.co.uk