* Rio Tinto hires Mandarin speaker to head China business
* Ian Bauert, a China veteran with iron ore experience
* Post comes as iron ore price talks pit miners against mills (Adds analyst, industry source, background, share price)
By James Regan
SYDNEY, Feb 5 (Reuters) - Rio Tinto has named fluent Mandarin speaker Ian Bauert to head its China business, at a time of tense iron ore price talks and a case against four employees accused of illegaly obtaining commercial secrets.
Bauert, a 30-year Rio Tinto veteran who opened the company's first China office 25 years ago, is specifically charged with improving rocky relations with the Australian miner's largest customer, chief executive Tom Albanese said in a statement on Friday.
"I am deeply committed to developing our relationship with China," Albanese said. "Ian's experience and leadership will provide strategic direction and help guide all aspects of our engagement with China, one of our most important partners."
Rio Tinto's lead iron ore negotiator in China and an Australian citizen, Stern Hu, and three other staff from China were arrested last July and remain in detention in a commercial secrets case that was referred to a prosecutor last month..
The case placed a cloud over already contentious iron ore price negotiations between China and Rio, fellow Australian miner BHP Billiton and Brazil's Vale as well as government-to-government ties.
China is Australia's biggest trade partner at $53 billion last year. Australia exported $15 billion worth of iron ore to China in 2008, or 41 percent of China's iron ore imports.
The big iron ore miners are asking Chinese mills for a 40 percent increase in prices this year after a fraught 2009 as demand surges beyond last year's record of 628 million tonnes, according to press reports.
The China Iron and Steel Association however said at the end of last year that foreign miners were expected to seek a 20-30 percent increase in benchmark prices for 2010, and made it clear that such an increase was unacceptable.
Last year Rio Tinto refused Chinese demands for lower iron ore prices than those agreed by Japanese mills, and analysts say the court case brings some pressure on Bauert to avoid another failure to agree to a contract.
"Stern Hu notwithstanding, Rio Tinto has a lot of its eggs in the iron ore basket and for that reason must keep its relationship with China open," said DJ Carmichael & Co analyst James Wilson. "To this end, someone with the experience Bauert has gained over the years serves that purpose."
Bauert comes to the post vacated by the relocation to the United States of Rio Tinto's former managing director for Asia, Tony Loo, who also held the separate job of managing director for China. Bauert's role will be limited to China.
"This is where someone with the experience of Bauert will earn his money, getting the job done without ruffling feathers," said a mining industry source in Australia who asked not to be named because price talks were confidential.
The appointment comes as Albanese takes strides to show investors the company has emerged from the financial crisis less scathed than some had thought and is back on a growth track.
Rio Tinto aims to boost iron production 6 percent to a record 230 million tonnes in 2010 and is considering a leap to 330 million tonnes within five years to capture growing demand for ore in the Chinese market.
If Rio Tinto pays a flat dividend for 2009 that would be seen as a clear signal that it is past its difficulties after slashing its $40 billion debt in half with a rights issue and asset sales, analysts said.
Rio Tinto shares were down 5.5 percent to A$66.24, while BHP Billiton was down 3.8 percent to A$39.44, reflecting weaker base metals prices and in step with declines in the wider market. (Editing by Ed Lane)