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Australia and UK Warn Guinea Over Rio Mining Rights and Not to Take Further Steps Before Presidential Elections

October 5, 2010

Australia and UK warn Guinea over Rio rights

By Tom Burgis in Lagos

Published: October 5 2010 18:04 | Last updated: October 5 2010 18:04

The UK and Australia have warned Guinea not to strip Rio Tinto of more of its rights to one of the world’s richest untapped iron ore deposits, in spite of the west African government’s claim that the Anglo-Australian group has breached mining laws.

The private correspondence marks an escalation in the bitter dispute over the Simandou deposit, as mining groups vie to exploit prodigious iron ore seams in what is already a top producer of the ore used to make aluminium.

In near-identical letters to top Guinean officials including the presidency, copies of which were obtained by the Financial Times, London and Canberra expressed concern that “any further unilateral decisions at this stage could send a negative signal to investors and the wider international community about Guinea’s commitment to due process and the rule of law”.

Last year, Guinea’s military-backed government upheld an earlier administration’s decision to strip Rio of two of Simandou’s four blocks on the grounds that it had broken rules by taking too long to develop a mine.

The letters arrived last week as the government set a February deadline for Rio to comply with regulations for submitting details of its work at Simandou and to renounce its claim to the two blocks or risk losing a third.

The intervention from the UK and Australia irked Guinean officials who have bridled at what they see as Rio’s domineering style.

“It’s a barrage that they feel will pressure us into accepting terms that are not only unfair but illegal, and we’ve decided not to yield to it,” Mahmoud Thiam, mining minister, told the Financial Times.

The two blocks taken from Rio were awarded to a group controlled by Beny Steinmetz, an Israeli diamond magnate, which in April brought in Vale of Brazil in a $2.5bn deal.

But Rio maintains it has “full rights” to Simandou and in July signed a $1.35bn deal with China’s Chinalco to develop it.

The following month Rio announced $170m of spending on top of the $650m it says it has already spent on pre-mine work at Simandou. Rio said it was “frustrated that we have not yet been able to resolve the dispute”, which was delaying its plans to move Simandou into production.

It added: “We are open to discussing all matters which are causing these tensions … What we cannot do, however, is walk away from important principles of transparency, due process and the rule of law.’’

The letters – signed by Henry Bellingham, minister for Africa in the UK’s Conservative-led government, and William Williams, Australia’s high commissioner in the region – also urged the government not to take further steps ahead of a much-delayed second round of elections for a civilian president.

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