Aug. 10 (Bloomberg) -- Rio Tinto Group, the world’s third- largest mining company, spied on China’s steel mills for six years, creating 700 billion yuan ($102 billion) in excess charges for iron ore, a report on a Chinese government-run Web site said.

Government agencies should enhance surveillance of companies they supervise, said the article posted yesterday on http://www.baomi.org, which is affiliated with the National Administration for the Protection of State Secrets.

China, destination for half the $52 billion annual trade in iron ore, detained four members of Rio’s Shanghai team a month after Rio abandoned a $19.5 billion deal with Aluminum Corp. of China. The arrest of the four, including Australian Stern Hu, strained relations with Australia.

“The article would appear to provide guidance on the nature of protecting state secrets rather than a specific comment on the Stern Hu case,” said Jia Liangqun, vice president of Mysteel Research Institute. “Rapid economic development has made the problem of information security more acute.”

Rio’s shares dropped 1.4 percent at 1 p.m. in Sydney today even as the benchmark S&P/ASX 200 Index gained 1 percent. Rio, based in London and traded in London and Australia, is the world’s second-largest iron ore exporter.

‘Without Foundation’

Rio’s Melbourne-based spokeswoman Amanda Buckley declined to comment, referring to a July 17 statement from Sam Walsh, head of Rio’s iron ore unit, saying allegations “that employees were involved in bribery of officials at Chinese steel mills are wholly without foundation.”

“China gave the employer of those economic spies more than $100 billion for free, which is about 10 percent of Australia’s GDP,” the article said. “It also caused the serious consequence of climbing losses in China’s pillar industry of steelmaking.”

The Chinese article didn’t say how it arrived at the 700 billion yuan.

Rio Tinto reported iron ore sales of $41 billion over the same period, according to Bloomberg data. China’s crude steel production jumped 83 percent over the five years to 499 million tons in 2008, according to Merrill Lynch.

China imported 1.6 billion tons of iron ore in the five years from 2004 to 2008 with demand more than doubling over the period, according to a Merrill Lynch & Co. report. The nation’s crude steel production jumped 83 percent over the five years to 499 million tons, according to Merrill Lynch.

Market Price

“The market sets the price, I don’t think there would’ve been any different outcome,” Mark Pervan, senior commodity strategist at Australia & New Zealand Banking Group Ltd., said in Melbourne. “It’s got nothing to do with Rio Tinto.”

Hu and three other Rio executives were detained on July 5 for allegedly stealing state secrets and actions that harmed the nation’s economic interests and security. Australia, which has said the detentions may be connected to annual price talks for iron ore, is seeking more information and has urged China to deal with the case expeditiously.

Step Forward

“This is another step forward and we are moving toward the Rio employees being charged,” said Michael McKinley, a professor of global politics at Australian National University in Canberra. “History tells us that if someone is charged, there is a strong prime facie case and they will most likely be found guilty.”

Australian Prime Minister Kevin Rudd told reporters July 15 that the world was “watching closely” how China handled the Hu case. China is the world’s largest buyer of iron ore and Australia’s second-biggest trading partner, with two-way trade valued at A$68 billion ($57 billion) in 2008.

Australia’s Department of Foreign Affairs and Trade wasn’t able to comment immediately.

The Web site is operated by the Gold Wall Press, which is administered by the Secrets Office of the Communist Party of China’s Central Committee, according to an introduction on the Web site. The article’s author is Jiang Ruqin, the Web site said, without providing further information.

“The case will still take some time,” McKinley said, “and China has a different definition of national security.”

--Zhang Dingmin, Helen Yuan. With assistance from Gemma Daley in Canberra, Jesse Riseborough and Madelene Pearson in Melbourne. Editors: Andrew Hobbs, Keith Gosman.

To contact the Bloomberg News staff for this story: Zhang Dingmin in Beijing at Dzhang14@bloomberg.net

Last Updated: August 9, 2009 23:19 EDT