Rio exits Guinea iron ore blocs

[] — Rio Tinto agreed to remove equipment from two disputed iron ore concessions in Guinea awarded to private firm BSGR, which is seeking partners to develop them, Guinea’s mines minister said on Thursday.

Rio, the world’s second biggest iron ore producer, said it would comply on Thursday with the order by Guinea, which had threatened to shut down the firm’s total operations there.

“Rio Tinto is complying with the ministerial directive and will complete the process of removing the drilling rig today,” it said in a statement.

Rio declined to say whether it planned to press on with its fight against the removal of blocs 1 and 2 of the huge Simandou concession, leaving it with blocs 3 and 4.

The row with Guinea comes on top of Rio’s confrontation with China over the arrest of four employees on suspicion of spying during iron ore contract negotiations.

Rio said it has spent more than $450 million on exploration at Simandou and considers it the world’s largest undeveloped iron ore deposit. It had planned to spend a total of $6 billion to develop the whole concession.

Guinea’s Mining Minister Mahmoud Thiam said BSGR, owned by Israeli diamond trader Beny Steinmetz, had asked the ministry to vet potential partners to develop its new concessions.

“We understand they are in advanced talks with them. Whether they develop it alone or with financial or strategic partners… to us it is not really relevant,” Thiam told a conference call.

A spokesman for Beny Steinmetz Group Resources (BSGR), which hopes to become one of the world’s four biggest iron ore producers, declined to comment about possible partners.

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Guinea hoped that all parties operating in the region would contribute to building the required rail and port infrastructure to cut costs and speed up the development process, Thiam added.

The two concessions were taken away from Rio by the previous government because it did not follow the mining code which required exploration and development of the entire concession, said Thiam, a former vice president of bank UBS in New York.

“I believe that if and when Rio realises that this decision is firm and irreversible, then they’ll start concentrating on actually developing the site,” he said.

“A company of their stature and size can only be good for a country that has mining ambitions such as Guinea.”

A letter Thiam dated June 26 criticised Rio for delays in developing Simandou project and said the global miner was destabilising the West African country.

The company had previously forecast that Simandou’s production would begin in 2013 at 8 million tonnes, rising to 70 million tonnes by 2018.

In the conference call, Thiam said his comments in the letter about Rio threatening civil unrest referred to the mining firm’s efforts to rally local people to oppose the removal of the two concessions.

He praised Rio for its development work in the region to help build roads, schools and hospitals.

BSGR has been active in Guinea since 2006 and discovered the Zogata iron ore deposit before the government awarded it part of Rio’s Simandou concession in December 2008.

The firm hopes to launch production at the Zogata mine in 2012 with 25 million tonnes of output a year and at the Simandou blocs 1 and 2 the following year, eventually ramping up that operation to 100 million tonnes a year.