June 23 (Bloomberg) -- Rio Tinto Group, the world’s third-largest mining company, must respect its obligations in Guinea or risk having its mining license withdrawn, the West African nation’s mines minister said.
The company sent a “very arrogant” letter to Guinean President Sekouba Konate about the Simandou iron-ore concession that Konate “did not like,” Minister Mahmoud Thiam said in a phone interview today from the capital, Conakry. Konate responded to Rio’s letter, Thiam said.
“He sent them back another letter asking them to respect their obligations in Guinea, otherwise they will lose their mining license and they only will be left with an exploration permit,” Thiam said.
A London-based spokesman for Rio Tinto couldn’t immediately be reached for comment on Thiam’s remarks.
Rio controlled the entire Simandou deposit until it was ordered by the government in December 2008 to hand over the northern half to closely held BSG Resources Ltd. In April, Vale SA, the world’s biggest iron-ore exporter, agreed to pay $2.5 billion for deposits in Guinea including Rio’s confiscated assets. Rio Chief Executive Officer Tom Albanese in 2008 described Simandou as the world’s “top” undeveloped iron-ore deposit.
Rio declined as much as 2.8 percent in London trading and was down 1.4 percent at 3,396 pence as of 11:32 a.m. local time.
Earlier today, Rio confirmed it received a letter from the Guinean government and that it would respond “in due course.”
“We have always maintained our firm rights to the entire mining concession that was granted based on the 2003 Mining Convention between Rio Tinto and the government,” it said.
In March, Rio said it had spent $600 million on the Simandou venture. Aluminum Corp. of China agreed to pay $1.35 billion for a 44.65 percent stake in the project that month.
Guinea holds as much as half of the world’s reserves of bauxite, used to make aluminum; more than 4 billion tons of “high-grade” iron ore; “significant” diamond and gold deposits, and uranium, according to the U.S. State Department’s website.
The country has been ruled by the military since December 2008, when Captain Moussa Dadis Camara led a coup following the death of former President Lansana Conte, who had been in power for two decades. Camara was deposed after being shot by an aide in December. Konate then took over the leadership of the junta and pledged to hold elections, which are scheduled to take place on June 27.