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Interview: Guinea Gives Rio Long Lead Time, February 2011, to Surrender Rights and Says Future Gov’t. Will Have Difficulty Cancelling Transition Govt’s. Mining Decisions

October 2, 2010

INTERVIEW-Guinea sets deadline for Rio’s surrender of rights

Published October 02, 2010

By Saliou Samb

CONAKRY, Oct 2 (Reuters) Rio Tinto has until February to formally give up its rights to part of Guinea’s giant Simandou iron ore concession or it will risk losing its remaining stakes, the West African state’s top mining official said.

The Anglo-Australian miner, which has invested more than$650 million in what it says is the world’s largest undeveloped iron ore deposit, has been in dispute with Guinea over blocks 1and 2, which the government gave to BSG Resources in April.

“We have asked in vain for Rio Tinto to give us written confirmation (that) they have given up half of Simandou inaccordance with the mining code,” Mines Minister Mahmoud Thiamtold Reuters in an interview late on Friday.

“If this isn’t done by February 2011, Rio risks losing the other two blocks under its control and could definitively lose its rights to the zone,” he said.

Officials at Rio could not immediately be reached for comment.

Rio in June said it retained “full rights” to the entire Simandou concession. It signed a $1.35 billion deal with Aluminum Corp of China, known as Chinalco, in July for development of the Simandou deposit.

Guinea stripped Rio of the two blocks during the rule  of former President Lansana Conte, who died in December 2008 andwas replaced in a bloodless coup by a military junta.

BSG, which is controlled by Israeli billionaire diamondtrader Benny Steinmetz, won the two blocks from the junta-led transitional government in April and sealed a deal with Brazilian mining giant Vale to explore them.

CONTRACT SECURITY

Guinea is in the midst of elections, which are meant to return the former French colony to civilian rule, and the country’s two presidential front-runners have both said they will review mining deals signed during the transition.

Analysts have said, however, they do not expect either candidate to take an aggressive approach, given Guinea’s reliance on mining for revenues and infrastructure projects.

“It will be very difficult for a future government to unilaterally cancel the mining deals that we have passed during the transition period,” Thiam said.

He said all of the deals were in accordance with the country’s mining laws, guaranteed swift development of resources and provided key infrastructure.

Guinea has yet to set a date for a run-off election between former Prime Minister Cellou Dallein Diallo and veteran opposition leader Alpha Conde amid political infighting over poll preparations.

Thiam also said a deal signed with U.S. oil firm Hyperdynamics in March giving the company rights to develop 24,000 square kilometers offshore was unlikely to be overturned by the next government regardless of who wins, because it had preserved 70 percent of the exploration zone for Guinea insteadof 66 percent before the accord.

He said international oil firms, including Malaysia’s Petronas, and Ivory Coast’s Petroci had expressed interest in exploring for oil off the coast of Guinea in the reamining area.

He added that UK-listed miner Bellzone’s iron ore mine and railway spur project connecting the Kalia mine site and the deepwater port of Matakan would probably cost $5 billion.Bellzone has said the China Investment Fund will help fund the project.

(Writing by Richard Valdmanis, editing by Jane Baird)

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