Rio Tinto Group (RIO), the third-biggest mining company, said it’s in talks with Guinea to try to resolve “outstanding matters” on the company’s application for a mining concession at the Simandou iron ore project.
The West African nation granted a three-month extension on Rio’s exploration license from tomorrow to allow the Ministry of Mines to study the application for a concession lodged by Rio Tinto unit Simfer SA, the London-based company said.
“This enables the Government of Guinea and Rio Tinto to continue the positive discussions currently under way between them, aimed at resolving all outstanding matters regarding the Simandou project,” Rio said in a statement today.
Rio is studying at least $6 billion of spending in Guinea, where new President Alpha Conde has ordered the drafting of a policy giving the country at least a one-third stake in mining projects. The company said in July it had invested $650 million at Simandou and planned to begin mining within five years.
Guinea’s mining policy review may jeopardize Rio Tinto’s 2010 agreement to sell a stake in the venture to Aluminum Corp. of China, or Chinalco, because the government has held off approving the transaction, UBS AG said in a Feb. 14 report.
Rio Chief Executive Officer Tom Albanese has described the situation as “very uncertain,” UBS said, citing a briefing with him in London. Rio has been involved in a dispute with Guinea since 2008, when the government ordered it to hand over part of the Simandou venture, a stake later acquired by rival Vale SA. (VALE3) UBS has valued the project at about $9.5 billion.
Rival in Guinea
Vale, the world’s largest iron ore exporter, yesterday said it would spend more than $1 billion to rebuild a 662-kilometer (411 mile) railroad in Guinea, where it plans to start producing the steelmaking ingredient next year.
The company, based in Rio de Janeiro, last year agreed to pay $2.5 billion for Guinean iron-ore deposits. The sites include Simandou North Blocks 1 and 2, the assets confiscated from Rio, and the Zogota project in Simandou South.
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