Guinea to review mining contracts

Feb 05 2013 10:10

Cape Town - Guinea will review all of its mining contracts including a 2011 settlement agreement with global miner Rio Tinto, as it conducts an audit of its mining registry, Mines Minister Mohamed Lamine Fofana said on Monday.

Guinean President Alpha Conde came to power in 2010 promising to strengthen the impoverished West African nation's mineral sector.

The government has since moved to overhaul the mining code and has set up a technical committee to review existing natural resources contracts, particularly those signed during the 2008-2010 period when the country was ruled by a military junta.

Rio Tinto initially controlled all of the Simandou resource, one of the largest untapped iron ore deposits in the world.

The Guinea government ousted it from the northern part of the Simandou deposit in 2008. Under a 2011 settlement the company secured permission to mine the southern half after agreeing to pay $700m and give the government the right to up to 35%.

Fofana said the 2011 deal and its integration with previous agreements was under review.   

"This accord has to be integrated with the initial framework agreement. To do that, we need to have discussions, and this is what the committee are doing, in order to make the necessary changes to the framework agreement," Fofana said on the sidelines of the Mining Indaba being held in Cape Town.

Fofana said there were "constant discussions" with Rio. The company was not immediately available to comment.

Guinean officials said last year that the review would focus on three of the largest contracts, including a deal signed by BSG Resources (BSGR) - part of billionaire Beny Steinmetz's business empire - to obtain the northern half of the Simandou deposit.

That project was put on hold last year as BSGR partner Vale cited uncertainties in regulation. Worries over the government's intentions have prompted BSGR to say it would consider all legal options to avoid expropriation.

The minister denied BSGR was being targeted.

"I do not understand why BSGR is stigmatised. For us, they are like any other mining project developing in Guinea."

"We do not discriminate, we do not differentiate between BSGR and any other company. The review concerns all companies ... there are no exceptions," Fofana said.

Guinea officials have said they expect to complete the review of the BSGR contract in the first quarter, but Fofana declined to comment on the timing or a potential outcome.

"We need to wait for the outcome of the review. For now, there has only been an exchange of documents," he said, denying there had already been offers to seek alternative investors.

The government is separately in talks to seek financing for its portion of the infrastructure associated with Rio's portion of Simandou. Fofana said there were "fruitful" contacts with financing institutions, but declined to comment further.  

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rio tinto  |  guinea  |  mining indaba  |  mining



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