Rio Tinto vows to fight for Guinea mining rights

KALGOORLIE, Australia (Reuters) - Global miner Rio Tinto (RIO.AX) (RIO.L) vowed on Monday to fight for its rights over a huge iron-ore mining project in Guinea after the west African nation challenged the company's mining permit.

Rio Tinto, under siege from a hostile $138 billion bid from rival BHP Billiton (BHP.AX) (BLT.L), has portrayed the Simandou project as a centrepiece of its growth agenda which it says is undervalued by BHP Billiton's all-share offer.

On Friday, Rio Tinto revealed that Guinea's president had written to the company, purporting to rescind its Simandou permit in the country's impoverished eastern corner, threatening a project that has already cost the company around $300 million.

"You can bet that Rio Tinto will take this very seriously and fight for its rights. This is all very confusing," Sam Walsh, head of Rio Tinto's iron ore division, told reporters on the sidelines of a mining conference in outback Australia.

Walsh denied Guinea government assertions that Rio Tinto was developing a monopoly on all the iron-ore resources of the Simandou precinct, saying this was "simply not true."

He said Rio Tinto's project comprised only 18 percent of the deposits of the Simandou range.

Rio Tinto has said Simandou is the world's largest undeveloped iron ore province. Rio estimates it is sitting on 2.25 billion tonnes of ore in Guinea and could extract 70 million tonnes from the mine in its first year.

Rio Tinto says it already employs thousands of Guineans at Simandou and has built schools and hospitals.

Walsh, commenting on challenges facing the wider iron ore industry, also said that, in addition to global political risks, miners faced rising costs and supply constraints.

"Everyone in the iron ore industry is facing a wide range of cost pressures that go beyond things like fuel and equipment," Walsh said, adding that new entrants to the industry were finding it difficult to get a toehold despite high iron ore prices.

Ore prices have leapt by as much as 95 percent this year, the sixth straight year of price hikes, as hungry steel-makers across Asia, especially China, eat into more of the world's reserves.

BHP Billiton, in promoting its bid for Rio Tinto, says the the combined group would be much more efficient and deliver lower production costs.

($1=A$1.07)

(Reporting by James Regan, Editing by Mark Bendeich)