April 9 (Bloomberg) -- A Guinean government review into ownership of the world’s biggest untapped iron-ore deposit has recommended billionaire Beny Steinmetz’s BSG Resources Ltd. and its partner Brazil’s Vale SA be stripped of the project.
A government committee said it found evidence of corruption in the award of the licenses for Simandou’s blocks 1 and 2 and the Zogota project, according to a copy of its report seen by Bloomberg News. “These corrupt practices tarnish and thus void the mining titles and the mining convention,” it said.
BSGR has denied any wrongdoing and today said it would prove the allegations are false. The company repeated that it intends to seek international arbitration.
“The Guinean government is relying on fabricated claims, compromised witnesses and illegitimate processes,” it said today in an e-mailed statement. “BSGR demands the opportunity to defend itself in a forum that plays by the rules and follows internationally recognized conventions, such as allowing cross-examination of witnesses.”
Vale declined to comment in an e-mailed statement today, referring questions to its March 27 filing to the U.S. Securities and Exchange Commission, where it said that the company may lose its investment in Simandou if Guinea accepts the recommendation of the technical committee. Today’s report said the evidence suggested Vale was not involved in corruption.
The recommendations would bar Steinmetz from pursuing his plan to develop the Simandou deposit with a $10 billion mine, port and rail project to benefit from prices for the raw material that have more than tripled in a decade. The report comes a year after a U.S. grand jury began investigating whether bribes were paid by a man linked to BSGR, Frederic Cilins, to a wife of former President Lansana Conte.
BSGR sold 51 percent of its stake in part of the Simandou area to Vale in 2010 in a deal valued at $2.5 billion. The country planned to preserve Vale’s interest in the project, President Alpha Conde, who became Guinea’s first democratically elected president in 2010, said in a Nov. 25 interview.
Rio Tinto Group, 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. Rio said in August it would be interested in regaining control.
Steinmetz, who is Israel’s richest person and has a net worth of about $6.7 billion, according to the Bloomberg Billionaires Index, amassed his fortune initially in the diamond trade, according to his personal website.
Guinea ranked 150 out of 177 in Transparency International’s 2013 corruption perceptions index.
To contact the editors responsible for this story: John Viljoen at email@example.com Alex Devine, Tony Barrett