July 8, 2009

China detains Rio Tinto executive

Chinese authorities have detained an Australian executive of international mining firm Rio Tinto on suspicion of espionage, the Australian government said.

Foreign affairs minister Steven Smith said Stern Hu, an Australian citizen, was being held in China and could face criminal prosecution. The company, Rio Tinto, said four workers from its Shanghai office had also been detained, The New York Times reported Wednesday.

Hu is the general manager of the firm's iron ore business in China.

Smith said the allegations did not appear related to company business. A month ago, Rio Tinto backed away from a $19.5 billion deal with Chinalco, a state-owned mining company.

That deal would have increased Chinalco's holdings in Rio Tinto from 9.3 percent to 18.5 percent.

After the deal fell through amidst strong political opposition in Australia, Rio Tinto signed several contracts with BHP Billiton.

The new deals with were denounced in China where some said the two companies could capture a controlling share of the iron ore market.

In a statement, Rio Tinto said the reasons for the arrests were unclear, but the company has sought clarification on what has occurred.

The Times said Chinese officials declined to comment on the case.