Simandou: the coveted iron ore deposit in Guinea
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The mining arm of Beny Steinmetz’s family conglomerate has asked an international tribunal to block the government of Guinea’s plans to auction multibillion-dollar iron-ore rights, which were stripped from the Israeli tycoon’s company following a corruption inquiry.

BSG Resources is also seeking the reinstitution of its mining rights in the west African nation and damages, according to an international arbitration claim filed last month and made public by the company on Wednesday.

“Guinea must be restrained from awarding the mining titles, which were unlawfully taken away from BSGR, to any third party,” BSGR said in its arbitration claim.

BSGR has denied wrongdoing since the Financial Times revealed the corruption allegations in 2012.

Citing press reports, BSGR said in its claim that leading mining companies including Glencore, ArcelorMittal and BHP Billiton had expressed an interest in the Guinean government’s planned tender for the rights to the northern half of Simandou, which were held until April by BSGR. It also named as potential bidders Rio Tinto and Vale, both of which have previously held stakes in the prospect.

Simandou is regarded as the world’s best undeveloped iron-ore deposit but it lies some 700km from the coast in remote mountains. Ivan Glasenberg, Glencore chief executive, said last month that his miner-cum-trader might be interested in Simandou but only if was not obliged to help fund the railway and port that would be required – at an estimated cost of $14bn – to tap the deposit.

BHP last month departed Guinea after it sold out of a separate iron-ore prospect to Arcelor, which has sought to dampen expectations of a move for Simandou.

All three companies declined to comment on BSGR’s claim.

Rio held the whole of Simandou from 1997 until 2008, when the rights to the northern half were confiscated and handed to BSGR – following, according to the Guinean government’s inquiry, promises of millions of dollars in cash and shares to the wife of Lansana Conté, whose quarter-century rule ended with his death that December. Rio has retained the southern half of the deposit and in May announced a $20bn investment agreement to develop it. It declined to comment on BSGR’s claim.

After the military junta took over upon Conté’s death, Vale in 2010 agreed to pay $2.5bn for a 51 per cent stake in BSGR’s Guinean assets. Only an initial $500m was paid before the Guinean government elected in polls that year ordered the project to be suspended and subsequently cancelled the companies’ rights.

The government has barred BSGR from bidding in the tender but cleared Vale to do so after the inquiry deemed that the Brazilian group had not been party to the alleged corruption. Vale is not named as a party to the BSGR arbitration claim and is pursuing its own claim against BSGR.

Guinea’s government called BSGR’s arbitration claim “entirely baseless”. It added that “none of BSGR’s statements and evidence respond in any way to the specific allegations made against BSGR which led Guinea to terminate and rescind these same rights and titles”.

BSGR has asked the International Centre for the Settlement of Investment Disputes to constitute a three-person tribunal to hear the dispute in London or Paris.

Copyright The Financial Times Limited 2017. All rights reserved.
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