LONDON--Mining company Rio Tinto PLC has privately assured
Guinea that its recently filed lawsuit against Brazilian rival Vale
SA isn't a secret move to reclaim control of a valuable African
iron-ore project, according to a letter seen by The Wall Street
Journal.
Guinean government officials had feared that Rio Tinto's suit
would discourage rival companies from taking part in any future
tender for the area, said one person close to the government.
In the letter, addressed to Guinea's mining minister, Kerfalla
Yansane, the Anglo-Australian giant sets out its rationale for
suing Vale and Israeli billionaire Beny Steinmetz. Rio Tinto
alleges the two colluded to rob it of the rights to one of the
mining world's most coveted prizes, a roughly 600 square-kilometer
iron-ore concession in the West African nation's Simandou
Mountains.
"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 of Guinea," wrote Alan
Davies, the Rio Tinto executive in charge of the project.
A Rio Tinto spokesman declined to comment. The mining arm of Mr.
Steinmetz's family conglomerate, BSG Resources, has described the
lawsuit as "baseless and bizarre," while Vale's chief executive,
Murilo Ferreira, told The Wall Street Journal last month that it
was "up to the accuser to show proof, under penalty of acting in
bad faith."
Rio Tinto used to hold the rights to all four of Simandou's
license blocks, a deposit that in its entirety is worth around $20
billion at current iron ore prices, according to an estimate by
Sanford C. Bernstein analyst Paul Gait.
In 2008, former Guinean President Lansana Conté stripped the
company of half its title--Simandou blocks 1 and 2--and later
awarded them to BSG Resources. Vale then agreed to a separate deal
with BSG Resources, worth $2.5 billion, to join its project.
But earlier this year Guinea's current government, headed by
longtime Conté opponent Alpha Condé-- accused BSG Resources of
paying bribes to win the licenses, an allegation that the company
has denied. Vale, meanwhile, has said any alleged wrongdoing in the
contract award occurred before their involvement.
Last month, it stripped BSG Resources and Vale of its share of
Simandou, putting blocks 1 and 2 back into play.
That decision reignited interest in Simandou from some of the
world's biggest mining companies, who notified authorities they
would be prepared to bid in a new tender for the blocks, according
to people close to the Guinean government.
Against this backdrop, Rio Tinto's decision to sue Vale, Beny
Steinmetz and BSG Resources set off alarm bells in the capital of
Conakry, according to one person. Of particular concern was the
fear that Rio Tinto's suit would discourage rivals from taking part
in any future tender, said the person.
However, Mr. Davies, in his letter to Mr. Kerfalla, expressly
says that the company would refrain from such a move.
"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 the
government of Guinea may undertake, nor to challenge the title of
any party who may come to acquire an interest in those blocks as a
result of any such process," writes Mr. Davies.
Write to Alexis Flynn at alexis.flynn@wsj.com
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