Israeli tycoon Beny Steinmetz defended his investment in a Guinea iron-ore mine, telling a Geneva court that the $5 billion valuation of a site that he secured for less than $200 million was part of the industry’s reward for risk-taking.
Steinmetz is testifying during the second day of his trial on charges of bribery in Geneva. He dismissed questions from presiding judge Alexandra Banna about transactions that allowed him to take control of a giant iron-ore mine in the south of Guinea.
The businessman and two others are accused of paying the wife of the former president of Guinea at least $8.5 million for the mining rights. Prosecutors also allege that they used forgery to create a complex web of shell companies and share structures to hide the payments. The trio deny the charges.
“If a business takes a risk, it’s normal that it’s compensated,” Steinmetz said. The project represented “a dream for Guinea.”
Prosecutors in Geneva, where Steinmetz lived and operated businesses, are pursuing the case against the three businesspeople accused of making payments to Mamadie Toure, the wife of late Guinean President Lansana Conte.
The case is the latest piece in a more than decade-long dispute over one of the world’s richest mineral deposits. Steinmetz acquired the rights to the Simandou iron-ore project in Guinea in 2008 just as Chinese demand surged. Then the African country’s new president, Alpha Conde, seized back the asset following a corruption probe, triggering investigations elsewhere into companies Steinmetz controlled.
Steinmetz’s BSG Resources Ltd. bought the rights just weeks before President Conte died. BSGR then sold a 51% stake to Brazilian mining giant Vale SA for $500 million up front, with an agreement to pay another $2 billion as the project met targets.
After Guinea’s Conde seized back the mine, Vale sought compensation from BSGR, and won $2 billion in a London arbitration that’s now become the subject of a legal dispute.
Investing in commodity markets and the mining industry can be risky, with the sectors often subject to volatile swings that catch out even the biggest companies.
Steinmetz’s previous bets on the sector haven’t all been successful. In 2007, he was forced to abandon plans for a $580 million share sale in London for his Cunico Resources vehicle as markets soured. He also pulled a planned $1 billion Hong Kong share sale in 2012 for his diamond-mining business.
(By Hugo Miller and Thomas Biesheuvel)