Rio May Face Guinean Threat to `Obey or Leave' as Mining Dispute Escalates

Rio Tinto Group may face a call from Guinea’s government to “obey or leave” over a dispute on its ownership of resources at an iron-ore project in the West African nation, according to Mines Minister Mahmoud Thiam.

Rio, the world’s third-largest mining company, and Guinea have exchanged letters this week over rights to the Simandou site in the south of the country. In correspondence yesterday, the government told the London-based company it planned to take a 20 percent stake in blocks 3 and 4 at the project, Thiam said.

“We are debating if we wait for their response or if we show them, as the government, that they are guests in our country and either they obey or leave,” Thiam said today in an interview in the capital, Conakry.

“We are considering our options and will respond in a timely manner,” said Faeth Birch, a London-based spokeswoman for Rio.

The spat dates back to late 2008, when a military coup that brought Captain Moussa Dadis Camara to power led to a review of mining contracts. Former President Lansana Conte had awarded projects with favorable terms in the 1990s when “no one wanted to come here,” Thiam said. “The country was on its knees.”

Rio controlled the entire Simandou concession until Guinea ordered it to hand over blocks 1 and 2 just before Conte’s death in December 2008 to closely held BSG Resources Ltd. In April this year, Brazil’s Vale SA agreed to pay $2.5 billion for deposits in Guinea, including those blocks.

Guinea Investment

Thiam, who was appointed minister three weeks after the 2008 coup, said Guinea is now more attractive to foreign companies and needn’t fear redressing the balance of power in the mining industry.

“Five years ago we would have shied away because we’d be afraid of losing new investors,” the minister said, referring to the dispute. “The market will not turn from Guinea because of Rio.”

Thiam said he will step down as minister after Guinea’s presidential election on June 27.

To contact the reporters on this story: Emily Bowers in Conakry via Johannesburg at ebowers1@bloomnberg.net; Alpha Camara in Conakry via Johannesburg at pmrichardson@bloomberg.net.

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