Rio Says Vale Spat Won’t Affect $20 Billion Guinea Plan

Rio Tinto Group (RIO) has assured the West African nation of Guinea its dispute with Vale SA over rights to the world’s biggest untapped iron-ore deposit won’t affect a plan to build a mine estimated to cost $20 billion.

“Rio Tinto wishes to clarify that this is a damages claim, and not a claim for reinstatement of the mining titles in question, nor in any way an action against the government,” Alan Davies, chief executive officer of diamonds and minerals at the world’s second-largest mining company, wrote in a May 12 letter to the Guinean mines minister obtained by Bloomberg News.

The claim won’t impede the “timely development” of the Simandou project, Davies wrote. Minister for Mines Kerfalla Yansane confirmed he received the letter when contacted by phone yesterday.

Rio last month sued Vale, Israeli billionaire Beny Steinmetz and his mining company saying they conspired to steal rights to Simandou. Guinea in April revoked rights to half the project held by a venture of Vale and Steinmetz’s BSG Resources Ltd. The country is seeking as much as $1 billion in a new tender process, a person familiar with the plan said last week.

Vale, Steinmetz and BSGR have all denied wrongdoing. BSGR said this month it would challenge as unlawful any attempt to negotiate fresh rights to Simandou.

‘Historic Agreement’

Rio Tinto will not challenge any decision by the government of Guinea in this regard, nor seek to prevent or interfere with any legal process of reallocation of Simandou Blocks 1 and 2,” Davies wrote in the letter. The company expects shortly to sign an “historic agreement” governing its investment in Simandou, he said.

Prior to 2008, Rio Tinto held rights to all four blocks at Simandou, which the government has said may cost $20 billion to exploit. Rio maintains ownership of blocks 3 and 4 while rights to blocks 1 and 2 were stripped from the company in 2008 and given to BSGR for free.

Rio would welcome the new owner of rights to Simandou becoming a “foundation customer” or an investor in the infrastructure for the project, including a 650-kilometer (404-mile) railway line, according to the letter.

Rio last year said a plan to begin output from Simandou in 2015 would prove difficult and it revised the start to 2018. The mine could produce as much 100 million metric tons a year, according to Paul Gait, an analyst for Sanford C. Bernstein & Co.

Rio advanced 0.7 percent to 3,355 pence at 11:58 a.m. in London trading.

The case is Rio Tinto Plc v. Vale SA (VALE5), 14-cv-03042, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporters on this story: Jesse Riseborough in London at jriseborough@bloomberg.net; Ougna Camara in Conakry at ocamara@bloomberg.net

To contact the editors responsible for this story: John Viljoen at jviljoen@bloomberg.net Tony Barrett

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