Rio Tinto eyes Simandou blocks

The iron ore giant would be interested in blocks 1 and 2 of Guinea's giant iron ore deposit if they were for sale, says chief executive Sam Walsh.

Mining titan Rio Tinto PLC would be interested in blocks one and two of Guinea's giant Simandou iron ore deposit if they came up for sale, the company's chief executive said.

"We know that there is iron ore there and clearly that could be attractive to us depending on how it was offered to us," Sam Walsh told reporters at a media briefing.

Rio Tinto secured a concession to develop the entire Simandou deposit in 2006 from Guinea's government, but half of the concession was stripped from the company two years later by the Guinean government, leaving Rio with two remaining blocks. The other two blocks--one and two--went to privately owned BSG Resources Ltd., which then partnered in 2010 with Vale to develop them.

The Guinean and U.S. governments have launched criminal investigations related to the purchase of the two blocks while the Guinean mining ministry also launched in 2011 a technical review of BSG Resources' rights over blocks one and two to determine how they were granted and whether the licenses should be maintained, amended or revoked.

BSG Resources, the mining arm of Israel-based billionaire Beny Steinmetz, has denied any wrongdoing and said it is prepared to take the Guinean government to international arbitration if needed to defend its rights.

Asher Avidan, President of BSG Resources, said: "Simandou blocks one and two were legally retroceded from Rio by the government of Guinea because Rio failed to make any progress in developing these assets besides drilling six holes in blocks one and two over a period of 13 years. Rio is not interested in developing these assets, they want to prevent others from doing so in order to maintain a competitive advantage."

Rio Tinto declined to comment on the matter.

Mr. Walsh said if the blocks were to become available, the Guinean government would most likely offer them via a tender process. "If it were attractive, we would be interested," he said.

Rio Tinto and the government are in talks about how to transform a settlement agreement signed in 2011 into an investment framework that would then need to be ratified by Guinea's parliament. Rio Tinto wants the investment framework ratified into law to ensure the terms of its further investment in the project. Rio Tinto paid $700 million in 2011 to the Guinean government when it signed the settlement agreement, which gave the government the right to a 35% stake in Rio's Simandou mine and a 51% stake in the port and rail infrastructure.

The equity terms of the mining project remain intact, Mr. Walsh said, but the government is now considering a third-party owner and operator model to supplant the existing joint-venture model. The new model would fit well with the government's desire to make the port and rail infrastructure open to third-party use, he said.

Mr. Walsh said the government "should be in a position to have [the investment framework] resolved by the end of September for it to go to parliament by the end of the year." He declined to name who might be interested in owning, developing and operating the infrastructure associated with the Simandou project.

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