Bloomberg News

Rusal Says ‘Senseless’ to Invest in Guinea After Mining Law

September 13, 2011

(Adds Rusal report in seventh paragraph.)

Sept. 13 (Bloomberg) -- United Co. Rusal, the largest maker of aluminum, said changes to Guinea’s mining laws mean investors will find it “senseless” to agree on new projects for the country, the biggest exporter of the metal’s main ingredient.

Rusal’s current concession to develop the Dian Dian bauxite deposit and Friguia complex, and its production at the Cie des Bauxites de Kindia mine, are guaranteed under the conditions of agreements the government signed, it said.

Rio Tinto Group and AngloGold Ashanti Ltd. are among mining companies also working in Guinea. Lawmakers on Sept. 9 adopted a mining code that will hand the West African nation 35 percent of local commodity companies and raise customs duties to 8 percent from 5.6 percent, Mines Minister Lamine Fofana said at the time.

The “mining code adopted in Guinea increases considerably tax pressure on mining companies, making it senseless to invest in development and new projects,” Moscow-based Rusal said by e- mail. “Any investor of good sense will look for investment opportunities somewhere outside Guinea.”

Rusal’s business in the country is operating normally, it said. “All our concessions were concluded long time ago and contain obligations of the Republic of Guinea,” it said.

Guinea expects a deal over disputes with Rusal by the end of the year, Reuters said today. The country will review mining companies’ contracts to remove “unconscionable provisions” granted by prior administrations, it said, citing Fofana.

Government Claim

Guinea may file a claim over terms of the privatization of units held by Rusal, the aluminum company said on Aug. 29 in its interim financial report. In July, a Rusal unit made a claim against Guinea with the International Arbitration Court in Paris to “preserve its right to arbitrate” outside of local courts.

Rio’s agreement with Guinea in April gives the nation the right to as much as 35 percent of the Simandou iron-ore venture, which the company has said will cost more than $10 billion. Tony Shaffer, a spokesman for Rio, declined to comment further.

AngloGold said last week it has a “stability agreement” with the country, which holds 15 percent of Societe Aurifere de Guinee, the company that owns the Siguiri mine. AngloGold owns the balance. “We have not been approached by the government to increase their stake,” the company said last week in an e- mailed statement. It reaffirmed the comments yesterday.

“These developments do not come as a surprise,” Bellzone Mining Plc, also with projects in the country, said by e-mail. “Bellzone is committed and ready to work with Guinea.” Bobby Morse, a spokesman for Avocet Mining Plc, declined to comment.

--With assistance from Jesse Riseborough and Thomas Biesheuvel in London, and Carli Lourens in Johannesburg. Editors: Tony Barrett, Amanda Jordan

To contact the reporters on this story: Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net; Yuliya Fedorinova in Moscow at yfedorinova@bloomberg.net.

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net.


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