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UPDATE 3-Rio says could be interested in larger Guinea presence
August 8, 2013 / 2:46 PM / 4 years ago

UPDATE 3-Rio says could be interested in larger Guinea presence

3 Min Read

By Clara Ferreira-Marques

LONDON, Aug 8 (Reuters) - Miner Rio Tinto , which is developing the southern half of the Simandou iron ore deposit in Guinea, said on Thursday the company could be interested in a larger footprint, including additional blocks held by rivals.

Rio had initially held the whole of the Simandou, one of the world's largest iron ore deposits. But in 2008 it was accused of moving too slowly and was stripped of the northern half by the then president, Lansana Conte, who died months later.

The northern half - blocks 1 and 2 - is held by the mining arm of Israeli billionaire Beny Steinmetz's conglomerate, BSG Resources, and Brazilian partner Vale. But that licence is being reviewed by the Guinean government, and all work on those blocks has stopped.

"It could be attractive, depending on how it was offered," Rio Chief Executive Sam Walsh said when asked about his interest in blocks 1 and 2 of Simandou. He said these could be offered via a tender process, should they become available.

Rio, the world's second-largest producer of iron ore, had worked on the northern half before its licence was revoked, Walsh said, and had told the government it would "like to get a return on this work". But he said a review of the ownership of the northern half was in the hands of the Guinean bureaucracy, specifically a technical committee.

Vale CEO Murilo Ferreira told reporters later on Thursday that the miner had not been contacted by Rio on the subject.

BSGR, however, said Rio had been "legally" stripped of blocks 1 and 2 after failing to make progress, adding that Rio's existing project was not commercially viable.

"Rio is not interested in developing these assets, they want to prevent others from doing so in order to maintain a competitive advantage," said BSGR President Asher Avidan.

Rio's path to first production on the southern half of Simandou has not been smooth, and progress has slowed as the miner comes under pressure from investors to slash costs and cut back on riskier, costly projects.

Rio and the government have for months been debating how to combine a 2011 settlement deal, which ended the dispute after Rio was ejected from the northern portion in 2008, with an original investment agreement, while weighing up technical studies and the issue of financing - particularly for Guinea's stake in the project's costly infrastructure.

The so-called framework agreement could now be resolved by the end of the year, while a new deal will likely see infrastructure owned and operated by a third party, Walsh said.

"The government and the shareholders are talking to a range of infrastructure organizations as to what is the best option to physically take it forward," he said.

A 2015 target for first production, long considered unrealistic by industry analysts and insiders, will be hard to achieve, Walsh conceded. Guinea's mines minister has also said the date is likely to be missed.

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