* Rights groups says five killed after soldiers open fire
* Clash was near major iron-ore mining development
* Brazil's Vale, BSG Resources in venture to build mine
* Government official says protesters wanted jobs
(Adds Guinea details, mine project outlook, Vale, BSG plans)
CONAKRY, Aug 8 (Reuters) - Guinea said it launched an
investigation into violence near a large iron-ore mine project
as a report seen by Reuters on Wednesday showed photos of five
people rights groups said had been killed by security forces
during a protest.
The clashes between security forces and villagers demanding
jobs took place last week in Zogota, where a joint venture
between Brazil's Vale, the world's second largest
mining company, and Israeli billionaire Beny Steinmetz's BSG
Resources (BSGR) is seeking to build iron an ore mine, an
official in the mines ministry said.
"A legal inquiry has been opened. ... The president of the
republic and the government would like to reassure citizens and
investors that every effort will be made to find out what
happened in Zogota and punish those responsible," said the
government statement, read out on state media.
The killings come at a time of rising tension over mining
rights in Guinea, which relies on mineral extraction for 70
percent of its exports.
The government has said it plans to review all mining
contracts, "clean up the business environment" and ensure that
foreign mining companies comply with a revised mining code.
The Vale BSGR project is among those under review.
The deaths occurred when soldiers dispatched to Zogota
opened fire on protesters, said the report by local rights
groups who visited Zogota on August 4.
"The village is virtually completely abandoned, especially
by women and children. Some adult and young men, armed with
guns, catapults, bows and arrows and machetes, remain on guard,"
the report said.
Mining company staff at the project were evacuated from the
site following the incident, a Vale official said on condition
of anonymity. A press official at Vale's Rio de Janeiro
headquarters said the company had no comment on the situation.
Vale and BSGR are seeking to increase output of high-grade
iron ore. Demand for the main steel ingredient is soaring in
China, even as the richest ore bodies in Australia and Brazil,
the two largest producers, are being depleted.
Guinea, already the world's largest exporter of bauxite, the
main ingredient in aluminium, is home to some of the largest,
undeveloped high-grade, iron-ore reserves.
The highest grade ores are more than 60 percent pure iron
and require little processing before being smelted into iron and
Vale and BSGR said in February they plan to start production
of iron ore at Zogota this year. The mine is designed to produce
up to 15 million tons of ore a year. Production in 2012 is
expected to be 2 million tons.
Vale, which bought a majority stake in the project from BSGR
in 2010, has said it hopes to increase output to 50 million tons
a year by 2020.
$5 BILLION INVESTMENT
In the coming years Vale, has said it plans to invest $5
billion on Zogota and the nearby Simandou project, investments
that are expected to include railway and port infrastructure to
ship the iron ore to foreign steelmakers.
The government has not yet approved the BSGR and Vale
agreement, which is one of several mining agreements being
reviewed by the government.
Zogota is in the far southeast of Guinea, an impoverished
West African nation with vast unexploited mineral resources. The
government said there had been some deaths but gave no further
(Reporting by Saliou Samb; Additional reporting by Jeb Blount
in Rio de Janeiro; Writing by David Lewis; Editing by Andrew
Osborn and Todd Eastham)