CONAKRY, March 11 Global miner Rio Tinto has slowed progress of its multi-billion investment in Guinea's untapped Simandou iron ore deposit and slashed staff, government sources in the West African country said on Monday.
The sources, who declined to be identified because of the sensitivity of the topic, spoke after weekend talks between top Rio Tinto executives and government officials, during which they said the miner had announced it needed the government to progress on financing and the agreement underpinning the project before it could move ahead.
The sources said Rio Tinto - under pressure from investors to cut costs and rein in spending - had cut staff in Guinea by 90 percent.
"(Rio Tinto) have essentially announced they have frozen their investments in Guinea, arguing that they are waiting for a more stable and secure regulatory framework from the government," a senior government official said, asking for anonymity.
Two other government sources, including an acting minister and a former minister who has retained a role in the administration of President Alpha Conde, confirmed that Rio Tinto had announced the investment freeze.
Rio Tinto denied it had stopped work, but confirmed it was working with the government on outstanding issues including financing for the government's share of ambitious planned infrastructure.
"The Simandou project is definitely not frozen and Rio Tinto continues to progress the project and is committed to its development," a spokesman for the company said. "The current priority is finalising the investment framework and for the Government of Guinea to secure its financing."
The spokesman said talks between Rio Tinto and the government had been "constructive".
Government sources said Rio Tinto's new chief executive Sam Walsh along with other company managers met with both President Conde and Mines Minister Mohamed Lamine Fofana to inform them of the company's decision.
The sources said Walsh told Conde and Fofana that Rio Tinto would reduce its budget by $600 million and cut its staff in Guinea to five people.
Rio Tinto is developing part of the giant Simandou iron ore concession, one of the world's largest untapped iron ore reserves, near the Liberian border.
Guinea has been hit by investment cuts by other mining giants since last year, including BHP Billiton, Vale , and RUSAL - driven in part by a government review of mining contracts and political instability.
A sharp slowdown in global commodity prices, which has led to record profit declines and writedowns for the world's top mining firms, including Rio Tinto, has forced some to shelve expansion plans and others to part ways with their top executives.