Rio Tinto suspends senior executive after Guinea investigation

MELBOURNE/CONAKRY (Reuters) - Rio Tinto RIO.AXRIO.L, the world's second-largest miner, has suspended one senior executive, accepted the resignation of a second and alerted U.S. and UK authorities after discovering $10.5 million in unexplained payments to a consultant in Guinea.

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Rio said on Wednesday it had launched an investigation after becoming aware on Aug. 29 about emails from 2011 that referred to contractual payments to an unidentified consultant relating to its project in the Simandou mountains, which contain the world’s largest untapped iron ore deposits.

News of the latest scandal to hit the mining industry follows Rio's announcement last month that it had agreed to sell its 46.6 percent stake in the Simandou project to state-owned Chinese metals producer Chinalco 3668.HK. It has raised worries that the project could falter.

The government in Guinea, one of the world’s poorest countries which is banking on iron ore to revive a broken economy, said it had not been informed of any wrongdoing and hoped there would be no further delay in beginning the project in a remote region that is expected to include railways, bridges and tunnels.

“We are following this situation closely in the hope that it will not have an impact,” government spokesman Damantang Albert Camara said.

Rio said it has suspended its energy and minerals head Alan Davies, who was in charge of Simandou in 2011. Its legal and regulatory affairs executive Debra Valentine, who was due to retire next May, has resigned.

Davies did not answer his mobile phone when contacted by Reuters. Valentine, who is also a board member of the EITI (Extractive Industries Transparency Initiative), could not immediately be reached for comment.

The Financial Times newspaper reported the internal inquiry at Rio focussed on the company’s dealings with Francois Polge de Combret, a classmate of Guinea’s President Alpha Conde who worked at Lazard bank until 2005.

The report could not be confirmed. De Combret could not be reached for comment and Lazard said it could not comment.

Rio, which has a dual stock listing in Britain and Australia, said it would also contact the authorities in Australia, and cooperate with any investigations.

Britain’s Serious Fraud Office said it had been notified about the payments, but declined to comment further.

Authorities and the industry have sought to improve governance in a sector that has faced several allegations of illegal payments to secure business in some countries.

The world's biggest miner BHP Billiton BHP.AXBLT.L last year paid $25 million to settle charges it violated a U.S. anti-bribery law because it failed to properly monitor its programme sponsoring foreign government officials at the 2008 Olympics in Beijing.

Four Rio employees were found guilty of bribery and stealing secrets in China in 2010 and jailed for up to 14 years.

Guinea is ranked by Transparency International as one of the most corrupt nations in the world.

Rio’s share price rose on Wednesday along with its peers on expectations the election of Donald Trump as U.S. President would help drive demand for industrial commodities. The stock touched a new high for the year in London, and closed up 6.8 percent.

Additional reporting by Barbara Lewis and Kirstin Ridley in London; Editing by Richard Pullin and Mark Potter