BSGR to Skip Hearing as Guinea Weighs Seizing Asset

(Corrects to remove comments from consultant in paragraphs seven and 19 of the previous version of this story.)

Relations between Israel’s wealthiest person Beny Steinmetz and the mineral-rich African nation of Guinea have deteriorated to such an extent that neither the billionaire nor any of his representatives plan to attend a final hearing into the ownership of a prized iron-ore asset.

While Steinmetz was once close enough to a former leader of the country to invite him to his daughter’s 2009 wedding, his BSG Resources Ltd. has more recently been fighting for the release of two executives from a prison in the capital Conakry. The company has said it’s the victim of a smear campaign that has culminated in a 14-month government review into how BSGR won rights to one of the world’s largest untapped iron-ore deposits. That review is set to conclude at a hearing this month that has the power to strip BSGR of the asset.

Steinmetz’s plans to spend $10 billion building an iron-ore rail, port and mine complex have been halted after what started as a Guinean review into how his company gained the rights in 2008 widened to at least four other nations. In April, a U.S. grand-jury began looking at whether bribes were paid by a man linked to BSGR, Frederic Cilins, to a wife of former President Lansana Conte. BSGR, which missed a Dec. 2 deadline to answer questions from the government, denies wrongdoing.

“We have a deadline, and if they give us a deadline we don’t care about what they say,” Steinmetz’s Geneva-based lawyer Marc Bonnant said by phone on Dec. 3. “But we are going to definitely give answers. Nobody is going to Guinea, of course.” A spokesman for BSGR declined to comment.

Gifts, Payments

The government last month asked BSGR and partner Vale SA of Brazil to provide details of gifts and payments allegedly passed to Guinean officials to help their venture win access to the ground in 2008, according to a letter sent to BSGR’s operation in the country and seen by Bloomberg News. Written evidence was required to be submitted to the review committee eight days before the planned Dec. 10 hearing, the letter showed.

That hearing has been delayed to Dec. 16 to allow the BSGR-Vale partnership to study evidence that the government will present at the hearing, a person with knowledge of the process said, asking not to be identified because the information isn’t public.

Ibrahima Sory Toure, vice president of BSGR and director of public relations, and Issaga Bangoura, a security official of the company, were released on Nov. 29 after being arrested in April as part of a Guinean investigation.

VBG Venture

“They are not in prison any more, but the investigations pursue their normal course,” said Sorry Cisse, public prosecutor for the Court of Kaloum, a district of Conakry. Toure and Bangoura are prohibited from leaving Conakry or meeting any person in connection with the matter.

The Vale-BSGR venture, known as VBG, wrote to the Guinean committee in a Nov. 7 letter, also seen by Bloomberg, that it had referred the questions to BSGR and asked them to respond, because the joint entity was only established in 2010, after the Simandou rights were won. VBG, 51 percent controlled by Vale, said it’s willing to appear at the hearing in Conakry and will try to respond to questions.

Guinea last month asked the venture to clarify responses to allegations made in 2012, and denied by BSGR, that payments and gifts were given to senior government and military officials from 2005 that helped it obtain the site.

Diamond Trade

Guinea asked for details of any gifts or payments made to the now deceased Conte, military figures, former Mines Minister Mahmoud Thiam, who was once an adviser to UBS AG and Bank of America Corp., and Conte’s fourth wife.

Steinmetz, who has a net worth of about $7.1 billion, according to the Bloomberg Billionaires Index, amassed his fortune initially in the diamond trade, according to his personal website.

Guinea is seeking to make a ruling on the license review by early next year, a person with knowledge of the matter said in October. The nation ranked 150 out of 177 in Transparency International’s 2013 corruption perceptions index.

The country plans to preserve Vale’s interest in Simandou, President Alpha Conde, who became Guinea’s first democratically elected president in 2010, said in a Nov. 25 interview in Abu Dhabi.

“It’s out of the question to hurt Vale; at the same time, the law should be obeyed, so we’ll have to find a solution,” he said. Conde declined to comment on whether the concession would be offered to bidders again, or given back to Rio Tinto Group should BSGR’s contract be canceled.

Important Project

Simandou is an important project for Vale and it plans to wait for the outcome of Guinea’s review process before making any decisions about future development, Clovis Torres, the company’s general counsel, told reporters Dec. 5 in London.

Rio Tinto, the world’s second-biggest mining company, was stripped of two of the four blocks of land making up the Simandou deposit in 2008. Rights to the ground were subsequently transferred to BSGR, which sold 51 percent of its stake to Vale in 2010 in a deal valued at as much as $2.5 billion. Rio said in August it would be interested in regaining control of the disputed iron-rich ground.

To contact the reporters on this story: Jesse Riseborough in London at jriseborough@bloomberg.net; Andy Hoffman in Geneva at ahoffman31@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net

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