"The Financial Times" reports that the Guinea government has launched a corruption investigation into how Beny Steinmetz Group Resources Ltd. (BSGR) acquired half the rights to the Simandou iron mine in 2008 for $160 million, after they were stripped from Rio Tinto Ltd. (LSE; NYSE; ASX: RIO) earlier that year. In April 2010, BSGR sold 51% of its stake in the mine to Brazil's Vale SA (NYSE: VALE; Bovespa; Euronext: VALE 3, VALE 5; IBEX: XVALO) for $2.5 billion. The investigation is part of the Guinea government's probes into mining deals struck under former dictatorships.
"The Financial Times" says, "The committee, which is backed by the billionaire investor and philanthropist, George Soros, has this week written to the Guinean joint venture of BSGR and Vale, listing a catalogue of graft allegations relating to BSGR’s acquisition of interests in Simandou and a smaller deposit nearby."
"Government investigators have gathered testimony from former business associates of BSGR, consultants and financiers who recounted tales of luxury gifts and payments to relatives of Lansana Conté, whose 24-year dictatorship ended with his death in late 2008, and certain government officials in his and subsequent regimes."
"BSGR said in response that the probe was motivated by political opponents and mining rivals. “This is the latest in an orchestrated campaign being conducted to undermine BSGR’s position in Guinea in order to enable our assets to be seized and sold to a variety of interested third parties,” it said. The company denied the allegations of bribes and payments, including a $2.5 million commission to the president's fourth wife for helping to secure the mining rights, saying, “We never made any payments."
"The Financial Times" says, "BSGR and Vale have 60 days to respond to the allegations, after which the committee will consider reclaiming the rights, adding another twist to a 20-year tussle to control the mountain’s riches. The committee told the joint venture it would take no further action until it received those responses."
BSGR said in response, "As ever, BSGR maintains that it is innocent of any wrongdoing and will use all legal means to protect its position in Guinea."
"The Financial Times" says, "The mining review is billed as a chance for Guinea to break with decades of oppression and alleged corruption. It is a test for Alpha Condé, the veteran opposition leader elected president in December 2010, and his two highest-profile advisers, Mr. Soros and Tony Blair, the former UK prime minister." It adds, "But opponents claim that the Condé government is seeking to free up mining rights for the benefit of allies and to use the review to extract additional payments from their current holders."
"The Financial Times" says, "Guinea’s mining committee this week questioned whether BSGR ever intended to mine its half of Simandou. It has asked BSGR and Vale about suggestions that the Steinmetz group was simply seeking to acquire the rights in order to sell them on, a practice known in the trade as 'flipping'. It is an allegation that BSGR strongly rejects, noting that it has only received $500 million from the Vale deal so far. 'This project has to happen for us to be paid,' it said. This is not about a short-term flip; it is about a long-term commitment.'"
Published by Globes [online], Israel business news - www.globes-online.com - on November 4, 2012
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