Guinea president says Simandou rights transfer likely broke law
The Simandou mountains in Guinea holds some of the richest iron ore deposits in the world and has the potential to transform the fortunes of the impoverished West African nation.
World number two miner Rio Tinto is developing the southern part of the vast mountain deposit with first production from the massive $20 billion project not expected until late 2018 at the earliest.
The northern part of the Simandou concession is held by BSG Resources, a company in the stable of billionaire diamond magnate Beny Steinmetz, and Brazilian giant Vale (NYSE:VALE).
All work on the section awarded to BSGR by a former Guinea dictator in 2008 and 50%-sold to Vale in 2010 has been halted as the government of Guinea under its first democratically elected president Alpha Condé revisits all mining contracts entered into under previous regimes.
BSGR was awarded the rights days before the death of Guinea dictator Lansana Conté in 2008 after spending more than $160 million exploring the prospect.
Conté had not long before stripped the Simandou blocks from Rio Tinto which had held the exploration rights since the late 1990, ostensibly over the Anglo-Australian company’s failure to develop the deposits.
The awarding of the rights are now the subject of Swiss and US anti-corruption investigations. BSGR denies the claims while Vale is not under investigation.
The Wall Street Journal reports (sub) Condé said in a recent interview BSGR likely violated a clause in the country’s mining code prohibiting the transfer of exploration rights with the Vale deal.
Vale has not commented on the matter but a BSGR spokesperson denied any laws were broken, “because the Brazilian miner’s stake wasn’t in the subsidiary that holds the rights to the concession,” and the transfer happened Vale has not commented on the matter but a BSGR spokesperson denied any laws were broken, “because the Brazilian miner’s stake wasn’t in the subsidiary that holds the rights to the concession,” and the transfer happened “at all times in accordance with the Mining Code and with the full knowledge and approval ” of the government at the time.
The Brazilian company acquired the interest for $2.5 billion, but stopped payments to BSGR after the first $500 million was forked over.
The committee reviewing the 18 historical mining agreements held hearings in December and January and is expected to deliver a decision by the end of the month.
Whatever the outcome, Vale may still be interested in developing Simandou, which has some of the highest grade ore on the planet.
Last month Condé visited Brazil where he met with Vale’s director of corporate affairs Rafael Benker. Condé was in the country on invitation of the Lula Institute, an NGO founded by former president Luiz Inacio Lula da Silva.
Lula is said to have close ties to B&A Mineração, an infrastructure and mining investment company set up by Roger Agnelli, former boss of Vale and a large Brazilian bank. Late last year BHP Billiton (ASX, NYSE:BHP) sold its 40% stake in its massive Nimba project in the same district as Simandou to B&A.