Global miner Rio Tinto dismissed concerns on Monday over a huge new African iron-ore project which is central to its defence against a $180 billion hostile bid from rival BHP Billiton
The $6 billion Simandou project in Guinea is one of several that Rio says is undervalued by BHP Billiton's all-share offer, but doubts about Simandou surfaced last week when it emerged that Guinea was reviewing its award of the concession.
We are confident. We are continuing to proceed with the project, Rio Chief Executive Tom Albanese told reporters.
Last week, Rio said Guinea had written to it, querying the validity of a decree issuing the Simandou concession, though Rio said at the time that the validity of a head agreement, under which the concession was held, was not under question.
Albanese said the issue revolved around the availability of land under the concession, but declined to go into detail, stressing that Guinea remained very supportive of the project.
We have found the world's largest-known undeveloped high-grade iron ore province at Simandou in Guinea, he said.
Rio Tinto estimates Simandou has 2.25 billion tonnes of ore.
Albanese was talking to reporters after addressing a business lunch in Sydney where he argued Rio Tinto's defence against BHP's bid in front of nearly 1,000 bankers, business leaders, analysts and rival mining executives.
Rio Tinto says the proposed bid, pitched at 3.4 BHP shares for each Rio share, is too low as it discounts Rio's pipeline of new projects and the profits it stands to make from booming markets such as China.
We remain confident that the medium- to long-term trend is for a sustained and substantial increase in demand for metals and resources, Albanese said in his lunch address.
BHP Billiton wants to buy its nearest rival to cut costs, grab a bigger share of world metals markets and boost pricing power, but it faces resistance not only from Rio but also from China, which is wary of dealing with such a powerful supplier.
Aluminium group Chinalco in March bought 9 percent of Rio, and there are media reports that Chinese steelmakers Baosteel, Wugang and Angang could jointly invest in BHP Billiton.
Albanese said he was watching Chinalco's investment closely, but did not elaborate.
He also touched on the wider issue of foreign sovereign funds investing in Australia's resources industry, a major world producer of iron ore, coal, nickel, gold, alumina and uranium.
Albanese backed Australia's cautious approach to foreign direct investment in mining at a time when the industry needed foreign money to dig more mines, build roads and hire more staff.
While I agree there is a case for prudence, I don't think Australia would want to miss out on this substantial opportunity by not taking advantage of the full breadth of global capital and global relationships that might be on offer in its own region, he said.
China has also been looking to raise its stakes in small and medium-sized Australian miners and prospectors to reduce its reliance on global giants such as BHP and Rio.
Rio shares were up 1.8 percent at A$136.91 by 0537 GMT on Monday, their highest since June 6. BHP gained 2.1 percent to A$43.95 in a broader market up just 0.04 percent. (Editing by James Thornhill, Mark Bendeich & Ian Geoghegan) (email@example.com; +61-2 9373-1814; Reuters Messaging: firstname.lastname@example.org))
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