Rio Tinto appears to have lost its rights to the northern half of a valuable mining concession in Guinea that is intergral to its iron ore production plans.
Rio Tinto appears to have lost its rights to the northern half of a valuable mining concession in Guinea that is intergral to its iron ore production plans.
The mining giant has received a letter from the Guinea Minister of Mines that "appears to indicate" it will be asked to relinquish the northern part of Simandou concession.
The letter confirms the group's entitlement to the southern half of the concession, the company said.
"Rio Tinto remains of the view that it has complied with all its obligations in relation to the concession such that it is entitled to hold and retain the entire concession, and will continue working in good faith with the government of Guinea to seek to resolve this matter on that basis," it said.
Rio Tinto in August received correspondence from the president of Guinea purporting to rescind the Simandou mining concession, a key growth project for the group.
Rio Tinto has been in negotiations with the government of Guinea since then.
Simandou, which has a 2.25 billion tonne iron ore resource, forms an integral part of Rio Tinto's plans to lift its overall annual iron ore production rate to 600 million tonnes.
Rio Tinto has spent $US300 million ($A446.63 million) on the project, which is expected to have the capacity to produce up to 70 million tonnes of iron ore when it comes online.
The company is spending $US20 million ($A29.78 million) per month on drilling and support at the project.
Rio Tinto says Simandou has the potential to be the start of the world's third iron ore range, similar to that of the Pilbara and Brazil.
The news follows reports that substantial losses at steel maker Sinosteel Corp caused the shutdown of Rio Tinto's joint venture Channar mine in Western Australia.
A mining industry source reportedly said the mine was shut down because Sinosteel refused to honour its JV contractual obligation to pay the benchmark contract price for the 10 million tonnes of iron ore produced at the mine.
A Rio spokesperson confirmed the mine had been shut since early November but has recently been re-opened.
It has also been reported that the president of Sinosteel is under pressure following the fall in the value of investment of Midwest Corporation, which it bought for $1.3 billion before the global meltdown.
Earlier this week, Rio announced that it would axe 14,000 jobs, cut capital spend from $9 billion to $4 billion in 2009 and increase asset sales in a bid to reduce its Alcan debt by $10 billion.
Shares in Rio shed $1.51 to $38.49 at 11:13 AEDT.
