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China holds Rio Tinto staff

FOUR Shanghai-based employees of Anglo-Australian mining giant Rio Tinto have been detained since Sunday by Chinese authorities on suspicion of espionage and stealing state secrets, Australian officials said yesterday.

Among the four was Stern Hu, who is the head of China operations for Rio's iron ore division and holds an Australian passport, Australian Foreign Affairs Minister Stephen Smith told reporters in Perth. No formal charges had been filed as of yesterday, he said.

Rio, which earlier confirmed the detention but refused to identify the four, declined to comment on the allegations, saying it hadn't received formal notification from Chinese authorities.

A Shanghai Public Security Bureau spokesman said yesterday it hadn't detained any Rio employees. A source said they were held by the Shanghai office of the State Security Bureau.

Several Chinese mills have also been investigated by Chinese authorities, other sources said. Chinese mills are the main customer of Rio, the world's No. 2 iron ore producer.

Local office mum

Employees remained tight-lipped at Rio's Shanghai representative office on downtown Huaihai Road yesterday as reporters showed up seeking information. Beijing-based Anthony Loo, head of Rio Tinto China, reportedly was in the Shanghai office yesterday for an emergency meeting on the issue.

The news comes after Rio scrapped a US$19.5 billion investment deal from Aluminum Corp of China (Chinalco). But Smith said there was no evidence for drawing any link between the detention and any commercial matters concerning Rio, such as the Chinalco deal.

Rio is deadlocked in its annual talks on iron ore prices with Chinese steel makers, which missed a key deadline last week.

Rio earlier agreed with Japanese and South Korean mills on a 33 percent price reduction for fiscal 2009, which started on April 1, but China's steel industry association insisted on a cut of at least 40 percent.

China Business News reported yesterday that China had agreed to the same prices as those accepted by Japan but for only a half-year period ending on September 30. The report said China had agreed to conduct negotiations on a biannual basis.

But both Xu Lejiang, chairman of Baosteel Group Corp, and Tian Zhiping, vice president of Hebei Iron and Steel Group, said yesterday that price talks are still going on.

The China Iron and Steel Association, which is leading this year's negotiations for China, couldn't be reached for comment yesterday.


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