Govt panel says Guinea should strip BSGR, Vale of rights to iron deposit

by Reuters
Friday, 7 March 2014 18:51 GMT

By Silvia Antonioli, David Rohde and Saliou Samb

LONDON/CONAKRY, March 7 (Reuters) - A technical committee in Guinea has recommended the government strip mining firm BSG Resources (BSGR) and its partner Vale of the rights to exploit a giant iron ore deposit because the panel alleges BSGR obtained the concession through corruption, sources close to the matter said.

The latest development in a saga surrounding one of the world's largest mining deposits casts uncertainty over the future of the sought-after Simandou, a mine that could help one of Africa's poorest countries to prosper.

It also raises concerns over the position of Brazilian miner Vale VALE5.SA, which, according to a source close to the company, has spent more than $1 billion in its Guinean venture and risks seeing its investment and efforts wiped away.

BSGR vigorously denied the allegations of wrongdoing and said it believes the committee's procedure is part of a predetermined and orchestrated plan to expropriate the company's mining rights.

"The review has been conducted throughout without any respect for basic due process and procedural fairness," a BSGR spokesman said on Friday.

The committee's report has no substance or sufficient evidence to support its recommendations, the spokesman said.

Vale, which has not been accused of any wrongdoing, declined to comment.



Under President Alpha Conde, Guinea launched a review in 2012 intending to shed light on certain mining concessions granted under previous administrations.

In a report prepared after months of hearings and investigations, Guinea's technical committee recommends the government re-tender the rights on the northern portion of Simandou, three sources said this week.

The committee alleges BSGR used corrupt practices to help obtain the concessions in 2008.

BSGR sold 51 percent of its Guinean assets to iron ore giant Vale in 2010, when they created a joint venture named VBG.

The committee proposes "that the proper authorities take all useful measures so that VBG company, the holder of the titles and agreement in question, and the companies that were the source of these corrupt practices, i.e. BSGR and the companies owned or controlled directly or indirectly by the BSGR group, will be barred from the procedure of re-awarding the titles and the agreement covered under these recommendations", one source quoted a letter from the technical committee, summarising the report, as saying.

Guinea government spokesman Damantang Albert Camara said the work of the technical committee was based on serious and convincing evidence and denied any predetermined or orchestrated plan to damage BSGR.

"Guinea only wants one thing: to defend its interests and have mutually profitable relations with investors who choose to come here," the government spokesman said.



The report recommends VBG be banned from reapplying for the rights but the sources said the government would be likely to grant Vale permission to take part in any new tender.

Other mining companies such as Rio Tinto RIO.L and BHP Billiton BHP.AX have also expressed interest in taking part in such a tender, sources said.

The letter summarising the findings of the technical committee's report was sent to VBG for any final comments and the report is expected to be published later this month, the sources said.

A strategic committee headed by President Conde - elected in 2010 in Guinea's first free vote after 50 years of one-man rule and two years of a military junta - will then make a final decision based on the findings.

BSGR said it intends to fight for its mining rights in Guinea and any effort to revoke or diminish them will be met with an international arbitration claim, a lengthy and costly process that could further delay development for the country.

Members of the technical committee were not immediately available to comment.

Reissuing the license could fetch up to $3 billion, according to Guinea's president, a tempting option for a nation with a $7 billion economy.

However, a source at a large mining company estimated that in the current environment of weakening iron ore prices and poor appetite for large, risky mining projects, the concession would fetch only up to $1 billion and only if certain logistic conditions were agreed.

He said Guinea should allow ore exports through a shorter route that crosses neighbouring Liberia, rather than Guinea, vital to make the project economical at lower iron ore prices.

Simandou, one of the deposits with the highest iron ore grades in the world, has attracted interest from some of the largest miners in the past.

Anglo Australian miner Rio Tinto RIO.AX RIO.L spent millions trying to develop the whole project until 2008, when Conte's government revoked its permit on the northern half and transferred the rights to BSGR, arguing Rio had moved too slowly.

(Additional reporting by Daniel Flynn in Dakar, Sabrina Lorenzi in Rio de Janeiro, Guillermo Parra-Bernal in Sao Paulo and Stephen Eisenhammer in London; Editing by Dale Hudson)

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