An interim management committee will take over the running of the world's top bauxite exporter, Guinea's CBG, from U.S. aluminium company Alcoa (AA.N: Quote, Profile, Research, Stock Buzz), the West African country's government said on Friday.

The committee will run Compagnie des Bauxites de Guinee (CBG) until March 2009, the government said in a statement after a cabinet meeting on Thursday.

The statement was the strongest signal yet that the month-old government would press on with mining reforms initiated under former Prime Minister Lansana Kouyate to maximise mining income in a country with a third of the world's known reserves of the aluminium ore.

CBG, whose Boke mine produces around two thirds of Guinea's bauxite, is 49-percent owned by the Guinean state. The rest is owned by the Halco consortium, of which Alcoa and Rio Tinto (RIO.L: Quote, Profile, Research, Stock Buzz) own 45 percent each and privately held Dadco 10 percent.

"Regarding the contract for management assistance, it is necessary to choose a new partner after the transitional period," the statement said. The management agreement with Alcoa had not met the state's expectations, it said.

The government statement was a result of a CBG board meeting last week, an Alcoa spokesman said.

"We are in discussions which are exploring the way to find the most effective way to run the mining operation," he said.

"We have been in discussions with the rest of the CBG shareholders for months."

The impoverished country's previous government and Halco agreed in April to review CBG's management contract as part of the country's efforts to maximise earnings from its important minerals industry, which included a review of mining contracts.

Mines ministry officials said at the time the agreement was helped by a positive relationship with Rio Tinto, which acquired the CBG stake when it bought Canadian aluminium maker Alcan.

Rio is also developing the Simandou iron ore project in Guinea, though in June the government indicated it was querying a decree which gave Rio access to the deposit, potentially one of the world's biggest iron ore mines.
Benchmark prices for industrial metal aluminium on the London Metal Exchange MAL3 were around $3,050 per tonne on Friday, having risen by 20 percent in the past two years.

RECORD OUTPUT

Cece Noramou, a senior official at the mines ministry, said the decision to install an interim committee had been taken by CBG's management board.

"We agreed that Alcoa should work for the moment with a provisional committee, but our wish is to change the manager," Noramou told Reuters.

"Halco Mining and the state of Guinea will have equal representation on the provisional committee," he said.

A senior CBG official said in January the company expected to produce a record 13.5 million tonnes of bauxite in 2008, up from 12.5 million in 2007, when strikes and unrest hit output.

A company official said production in the first seven months of 2008 was on track to reach the target.

"We have exceeded our forecasts. As of now we have filled nine ships more compared to last year, which is between 250,000 and 300,000 tonnes of bauxite," said the senior official, who declined to be identified.

But despite rising output, the government statement said CBG's management under Alcoa had failed to meet targeted cost reductions. An internal audit had revealed a loss of $10 million due to theft of fuel alone, it said.

The statement said Prime Minister Ahmed Tidiane Souare, a party ally appointed in May by President Lansana Conte, was keen to increase mining earnings in Guinea, the world's top bauxite exporter which also has gold, diamonds, iron and uranium.