The government of Guinean President Alpha Condé has approved last week’s recommendation of revoking iron ore mining licences for BSG Resources (BSGR) and its joint venture partner, Brazil’s Vale (NYSE:VALE) in the mineral-rich Simandou mountains.
According to a Guinean official quoted by Reuters, the West African nation will withdraw the mining permit held by VBG, a company run by BSGR and Vale, and will also cancel its Zogota mining concession.
BSG Resources, the mining arm of Israeli tycoon Beny Steinmetz’s family conglomerate, sold a 51% stake in its Guinean assets to Vale in 2010 in a $2.5bn deal, under which $500 million was paid upfront by the Rio de Janeiro-based company.
Since then, the venture has been thwarted by logistical obstacles and later accusations that BSGR used bribes to acquire the mining rights it now shares with Vale, and that both are about to lose.
In an e-mailed statement, a BSGR spokesperson told MINING.com Guinea’s decision is as predictable as it is unlawful. “BSGR obtained the mining rights lawfully and will mount a vigorous effort to overturn this decision (…) The Guinean government is relying on fabricated claims to justify President Alpha Conde’s effort to reward political allies who allegedly helped rig his election by providing them with BSGR’s legally acquired mining rights,” it says.
The source also said BSGR looks forward to international arbitration, where this process will be exposed for the first time to a fair and transparent legal process that establishes the truth and protects the firm’s rights.
Vale, which has not been accused of any wrongdoing itself, announced it would put the project on hold in October 2012 but has been silent on the issue ever since.
However, in its annual report filed to the US Securities and Exchange Commission last month, the miner revealed for the first time that it was bracing itself to lose all its investment in the mine.
Though it is far from ports, roads and rail, the iron ore studded in Simandou’s hills is easily extractable. Those deposits are among the richest in the world and have the potential to transform the fortunes of the impoverished West African nation.