China has underscored its power in the developing world by revealing it was offered a huge African iron ore field seized from Rio Tinto, but declined out of "sensitivity" to international repercussions.
The offer, by late Guinea dictator Lansana Conte to Chinese companies including Chinalco, has implications for the Australia-China relationship, and Chinalco's $US19.5 billion ($A27 billion) investment bid in Rio Tinto.
Rio had sunk $600 million into Guinea's Simandou iron ore concession and had planned to invest another $10 billion to make it the largest iron ore mine outside of Australia and Brazil.
Wang Wenfu, who leads Chinalco's overseas acquisition team, which includes its pursuit of 18 per cent of Rio Tinto, told The Age that the Guinean Government last year offered to hand Rio Tinto's iron ore tenement to Chinese state-owned companies in exchange for railways, roads, ports and hydroelectricity projects.
The Chinese Government has already built a 50,000-seat sports stadium, a national assembly building and other landmarks in the Guinean capital, Conakry, and provided services including training for the army's special forces.
"The Guinea Government was trying everyone in China, including Chinalco," Mr Wang said.
Ultimately, some time after the August Olympics, attended by Mr Conte, Beijing declined.
"The Chinese Government encourages Chinese companies to go to Africa, but they are also sensitive to the international results," said Mr Wang. "Chinalco said no - it wouldn't have been professional."
He added African countries wanted to work with the Chinese Government because of its history of support there, demonstrating how China's influence in Africa could prove useful for Rio and Australia.
"It's an example of how Chinalco could enhance the position of Rio Tinto. This sort of thing is happening wherever you go in Africa." He also said China might not be so accommodating of Australia's international interests if Chinalco's investment in Rio was not approved by the Australian Government.
The episode shows how China is pulling back from a previously gung-ho attitude to investing in unstable developing nations.
"China is getting better aware of the practices of African governments to divide and rule among Chinese companies and foreign powers," said Zha Daojiong, professor of international relations at Peking University.
But China's decision refuse the multibillion dollar deal has not yet helped Rio Tinto's interests in Africa.
Late last year Mr Conte handed the northern half of Rio's Simandou tenement to BSG Resources Mining & Metals, controlled by a controversial Israeli diamond-mining billionaire, Benny Steinmetz. "Mr Steinmetz will see us in court," said Sam Walsh, head of Rio Tinto's iron ore division.
In one version of events, Guinean politicians decided to end Rio's tenement at Simandou because they were unhappy that Rio wanted to connect the proposed mine directly to an existing port in Liberia, rather than build a railway along the length of Guinea to a new port on its coast.
"For them, it's if you invest in our infrastructure, we'll pay you back with mining resources," said Mr Wang.
In another version, Rio was also considering the indirect railway-and-port option and only lost its grip on Simandou when some Beijing leaders systematically courted Mr Conte.
Mr Walsh said his company had talked with Chinalco - which has bauxite exploration activities in Guinea - about running Simandou as a joint venture, but the discussions were superseded by more comprehensive investment talks after BHP Billiton dropped its hostile takeover bid for Rio Tinto in November.
Guinea is one of the world's poorest and most ill-governed nations, with annual per capita income of just $US442 ($A612) and is ranked 173 out of 180 countries on Transparency International's corruption perception index.
In late December, Captain Moussa Dadis Camara announced that Mr Conte had died and that he had seized power.
Mr Walsh said the new dictator has not overturned his predecessor's decision to deprive Rio of its tenement rights. "We're now in a hiatus," said Mr Walsh, "But we are confident we retain legal rights to the full Simandou tenement."
Rio has said it plans to mine more than 70 million tonnes of iron ore a year in Simandou and possibly as much as 170 million.
Mr Walsh said Rio had been reducing its work in the southern half of the tenement, where the company has focused on development, until clarity was restored.
Source: Melbourne Age
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