Guinea's military junta is toning down its aggressive stance towards the foreign mining companies that provide the poor West African country with most of its export income, the Mines and Energy Minister told Reuters.

The first four months of Captain Moussa Dadis Camara's rule have been characterised by severe public criticism of many of the firms active in the world's biggest bauxite exporter, spooking investors already worried by crashing metals prices.

The period of public hearings and admonitions has expired, we are now entering a period of consolidation and stablilty. In his own words, the president said to me, 'we will lay off the mining companies, we will create an environment in which they can operate', Mahmoud Thiam told Reuters in an interview.

Thiam said the government was aware companies were more likely to scale back operations and reconsider investment plans in the face of perceived politial risk, and that would deprive Guinea of badly needed income.

Perceived instability is being used as an excuse by some companies who want to scale down, when 90 percent of decisions to slow or close are due to markets, he said late on Thursday.

He did not name any companies but some of the world's biggest resources firms operate in the West African state.

Rio Tinto, RUSAL and AngloGold Ashanti all operate in Guinea, which on top of its primacy in aluminium ore bauxite is also a gold producer and has the reserves to be a major source of iron ore. The junta has pledged to review deals signed under a 24-year regime that ended when President Lansana Conte died last December, which led to Camara's bloodless coup.

Uncertainty over the terms of that review, and the fear that it might be used as a means of cancelling contracts or demanding more money, has worried investors in the Guinean mining sector.

But Thiam, a former vice president of Swiss bank UBS in New York, said those fears were unfounded: We don't see reviewing mining contracts as blanket annulling. Contracts are legally binding and we will respect that.

We will go through existing contracts and look for where companies or we are not in line with the text. If we find clauses that are clearly inequitable or illegal, we reserve the right to call those into question, he said.


One deal under review is the sale of the Friguia alumina refinery, Guinea's biggest industral project, to Russian metals firm RUSAL in 2006. Thiam said figures seen by the government indicated the plant was sold to RUSAL for only $19 million, when independent valuations put it at $250 million.

It's legitimate that the government looks into how that transaction was completed, and if there is anything to be renegotiated, Thiam said.

In April, Camara said Guinea would challenge the sale of the refinery, which employs 1,000 people and has capacity to produce 640,000 tonnes of alumina per year.

What's started is a legal process that will determine if (the sale) is legal according to Guinean law, Thiam said.

If the deal is found to be illegitimate, Guinea will demand that RUSAL makes restitution, or forfeits the contract. RUSAL has said it is confident the deal is legitimate.

Another point of dispute is Rio Tinto's Simandou iron ore concession, a multi-billion dollar project and potentially one of the world's biggest and highest quality sources of the steelmaking raw material.

Rio is contesting one of the Conte administration's last acts, which gave a portion of the area to to BSGR, a new entrant to the iron ore industry.

But Thiam rejected the complaints: As far as the government is concerned, there is no issue, it's resolved.

We'd rather have two companies operating in parallel than one sitting on the reserves and taking 100 years to go through those reserves. Iron ore reserves are not worth anything to us as long as they are not sold. We can't afford to wait. Neither company is producing iron ore at Simandou, though Rio has spent $450 million on exploration there.

Thiam said firms wondering what to expect from the review should not use RUSAL as a benchmark.

RUSAL is a specific case. The fact that no other companies have been called up the way RUSAL was should be a comfort. (Editing by David Lewis)

(c) Copyright Thomson Reuters 2009.