Rio Tinto Sues Vale, BSGR Claiming Conspiracy Over Mine

Rio Tinto Plc (RIO) sued Vale SA (VALE5) and Israeli billionaire Beny Steinmetz and his BSG Resources Ltd., saying they conspired to steal rights to the world’s biggest untapped iron-ore deposit by bribing officials in Guinea.

Rio also accused Vale of passing confidential information it obtained during discussions the two companies had about Vale buying a stake in the Guinea property to Steinmetz and BSGR. Steinmetz, BSGR and Vale then used that information to advance their bid for the mining rights, Rio said in a complaint filed yesterday in federal court in New York.

“It’s up to the accuser to present the evidence, otherwise they would be acting in bad faith,” Vale Chief Executive Officer Murilo Ferreira told reporters during a conference call yesterday.

Rio, which said it spent 11 years and hundreds of millions of dollars developing mining operations in the Simandou region of southeast Guinea, lost half its interest in 2008, valued in the billions of dollars, when the Guinean government decided to give the stake to BSGR, according to the complaint. That decision followed a $200 million bribe to Mahmoud Thiam, the former mining minister, Rio claimed.

“While BSGR and Steinmetz pursued their illegal bribery campaign in Guinea, Vale’s role in the scheme was to continue to obtain Rio Tinto’s highly confidential and proprietary information under false pretenses, and pass that information on to Steinmetz and BSGR in order to facilitate their efforts to induce officials in the Guinean government to rescind Rio Tinto’s rights,” Rio said in the complaint.

Grand Jury

In January 2013, a grand jury in New York began investigating possible violations of the Foreign Corrupt Practices Act and criminal money-laundering in connection with the Simandou mining concession, according to U.S. prosecutors.

Vale was cleared of any wrongdoing in connection with the purchase of Simandou mining rights by the governments of Guinea, France, Switzerland and the U.S., Ferreira said. Guinean President Alpha Conde said he expects Vale to participate in a future bidding process for Simandou, Ferreira said, adding that the company still needs to learn about contractual terms for an eventual participation.

“Rio Tinto chose to do nothing with its mining rights so the mining rights were taken away,” Theo Crutcher, a spokesman for BSGR, said in an e-mail yesterday. “Baseless and bizarre lawsuits like this won’t change that fact.”

‘Borderline Comical’

Thiam, the former mining minister, said in an e-mailed statement yesterday that Rio’s claims are false and “borderline comical.” He said Rio poses as facts events that never took place and may be attempting to divert attention from its unwillingness to develop the property.

“Unfortunately, it’s Guinea’s economy that will continue to suffer at the hand of corporate bandits,” Thiam wrote.

James Margolin, a spokesman for U.S. Attorney Preet Bharara in Manhattan, declined to comment on whether the government is investigating Rio’s allegations.

Steinmetz’s Geneva-based lawyer, Marc Bonnant, didn’t respond to phone calls seeking comment on the lawsuit.

The dispute over the Guinean mining rights pits two of the world’s biggest mining companies against one another. Rio and Vale, the No. 2 and No. 3 mining companies in the world respectively, have a combined market value of about $170 billion and control of more than half the world’s iron exports. BHP Billiton Ltd. (BHP), based in Melbourne, is the world’s biggest mining company.

Diamond Trade

Steinmetz, who has a net worth of about $4.2 billion according to the Bloomberg Billionaires Index, began amassing his fortune in the diamond trade, according to his personal website. He and BSGR partnered with Vale because the company had iron mining experience and resources to develop the mine, Rio claimed.

Vale began discussions in August 2008 to buy part of Rio’s Simandou rights, Rio said in the complaint filed yesterday. As part of the negotiations, Vale gained access to confidential information, including geological and technical data, mining and drilling methods, ore composition and plans to build a railroad through Guinea’s west African neighbor, Liberia, to bring the iron ore to port, Rio claimed.

Rio contended Vale broke a confidentiality agreement, secretly sharing the information with Steinmetz and BSGR. Vale continued discussions with Rio, feigning interest in doing a deal while extracting information, according to the suit.

Rio also claims Vale “knew or should have known” that BSGR was bribing Guinean officials to undermine Vale and take away its rights to mine in Simandou.

Fourth Wife

In addition to Thiam, the mining minister, BSGR paid bribes to Mamadie Toure, the fourth wife of former Guinean president General Lansana Conte according to Rio. Toure is named as a defendant in the Rio complaint.

Mary Mulligan of Friedman Kaplan Seiler & Adelman LLP, a lawyer for Toure, declined to comment on the Rio allegations.

Guinea, located on Africa’s west coast, ranked 150 out of 177 in Transparency International’s 2013 corruption perceptions index.

In March, Frederic Cilins, a French citizen with ties to BSGR and Steinmetz, pleaded guilty to interfering with the U.S. grand jury probing the Simandou mining concession. Cilins was charged with trying to pay Toure, who’s cooperating with prosecutors, to lie to investigators and to turn over documents for Cilins to destroy. Cilins faces as much as five years in prison when he’s sentenced June 27.

Florida Arrest

Prosecutors claimed Cilins, who’s named as a defendant in the Rio suit, was acting on behalf of BSGR and Steinmetz when he was arrested April 14, 2013, at the airport in Jacksonville, Florida. Also named in the Rio suit are two men prosecutors linked to Cilins.

Rio is represented in the suit filed yesterday by Quinn Emanuel Urquhart & Sullivan LLP. The law firm represented billionaire Leonard Blavatnik in his lawsuit against JPMorgan Chase & Co. (JPM)

Rio claims the defendants violated U.S. civil racketeering law and committed fraud. It’s seeking unspecified damages, which may be tripled under the Racketeer Influenced and Corrupt Organizations Act.

The case is Rio Tinto PLC v. Vale SA, 14-cv-03042, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporters on this story: Bob Van Voris in federal court in Manhattan at rvanvoris@bloomberg.net; Jesse Riseborough in London at jriseborough@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net Fred Strasser, Andrew Dunn

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