Rio says Guinea iron ore project still on track

By James Regan

SYDNEY (Reuters) - Rio Tinto (RIO.L) (RIO.AX) dismissed concerns that it could be barred from digging a huge iron ore mine in Africa, as it builds its defence against a $180 billion (92 billion pounds) bid from bigger rival BHP Billiton (BHP.AX)

(BLT.L).

Rising global demand has turned rust-red iron ore into gold for Rio and other miners, with prices up sharply over the last half-decade, generating billions of dollars in extra profits.

"Iron ore is becoming an increasingly significant earner for the big diversified mining houses," said Eagle Mining Research analyst Keith Goode said.

The Simandou project in Guinea, estimated to cost $6 billion, is one of several that Rio says is undervalued in BHP's all-share offer. But doubts about Simandou surfaced last week as it emerged that Guinea was querying a decree giving Rio access to the lode.

Rio said then that Guinea spelled out its concerns in a letter, but insisted the validity of a pact under which Rio held the concession was not under question.

Rio Chief Executive Tom Albanese said on Monday the issue involved only the availability of land, and stressed that Guinea remained very supportive of the project, earmarked to start in 2013.

In comments to reporters, Albanese reiterated his stance that Rio had plenty of room to grow on its own, countering BHP claims that a merger would streamline ore distribution and increase profits.