Rio Tinto sues Vale over iron ore rights in Guinea

Published by MAC on 2014-05-03
Source: Mining.com, Reuters, Mining Weekly

War of Titans: Rio Tinto suing Vale over iron ore rights in Guinea

Cecilia Jamasmie

Mining.com

30 April 2014

Whomever wins the battle over Simandou will have a powerful position in the global iron ore industry.

In a new and unexpected twist in the battle to control Guinea's rich Simandou iron ore deposits, the companies once operating in the area have began a series of billion-worth lawsuits, with iron ore miner No.2 Rio Tinto, suing the world's largest producer Brazil's Vale.

The first one to shoot was Vale, which filed Monday an action against his former partner in Guinea BSG Resources, the mining arm of Israeli tycoon Beny Steinmetz's empire, before the London Court of International Arbitration, Swiss newspaper Le Temps reports.

One of the paper's sources said Vale is seeking a minimum compensation of US$1.1 billion, due to losses suffered because BSGR's actions in Guinea. Last week, The West African nation concluded that BSG Resources obtained the Simandou and Zogota concessions through corrupt practices and decided to revoke all mining rights for both companies.

Vale had a 51% stake in the project, which acquire from BSGR in 2010 in a $2.5bn deal.The company however only paid $500 to Steinmetz's firm, suspending all instalments left as soon as it learned of the accusations against its partner.

Guinea's President Alpha Conde said Wednesday it was clear the Rio de Janeiro-based firm did nothing wrong, adding the mining giant is free to reapply to acquire rights to one of the largest untapped iron ore deposits in the world.

According to AP, Conde told reporters in Geneva today the country would welcome a new bid from Vale, but it had no preference among bidders and would select one transparently.

When contacted about it, a BSGR spokesman told MINING.com it had no comments, adding the company was "looking forward to proving the truth through due legal process by prosecuting our rights in the very near future against the Guinean Government."

Here comes Rio Tinto

MINING.com learned Wednesday that mining giant Rio Tinto, which has spent years of work and several billions in the southern part of the $20 billion Simandou iron ore project, has filed its own lawsuit against both Vale and BSGR for what it qualifies as a "steal" of its previously-owned concessions.

In the 50-page document submitted today in a New York court, and posted later in Rio's website, the company argues it held talks with the Brazilian miner in 2008 to determine whether they "could agree to terms on Rio Tinto's interest in Simandou."

The London-based miner claims Vale used that "highly confidential and proprietary information" in its favour, after realizing that gaining control of the Simandou deposit would strengthen its position in the world's high-grade iron ore market

The London-based miner claims Vale used that "highly confidential and proprietary information" in its favour, after realizing that gaining control of the Simandou deposit would strengthen its position in the world's high-grade iron ore market, as the only other comparable source is Vale's own Carajas Iron Ore Mine in Brazil.

In an unusually hostile language when it comes to legals documents, Rio claims Vale knew of BSG ways:

"Defendant Vale saw a golden opportunity to not only obtain that control, but to do so on the cheap, when Vale learned from Rio Tinto that Defendants Steinmetz and BSG Resources Limited (collectively with its named subsidiaries and affiliates, "BSGR") were attempting to interfere with and steal Rio Tinto's rights to the Simandou concession. Given BSGR's reputation for corruption and bribery-well known among those active in the mining industry, including Vale- Vale was on notice that Steinmetz's and BSGR's efforts to misappropriate Rio Tinto's rights included bribing various Guinean officials."

In the lawsuit Rio adds that Vale was "at the heart" of a conspiracy to take over the largest untapped iron ore deposit in the world. The miner's claim also names Mahmoud Thiam, a former Guinean mining minister, among the alleged conspirators in the scheme to steal its assets. It alleged that he received a $200m bribe from Steinmetz for facilitating the granting of mining licenses to BSGR for the half of Simandou that had been stripped from Rio.

Rio has already spent over $3 billion actively building its project in the southern part of what is considered one of the world's largest untapped deposits of iron ore. At full production Rio's Simandou mine, to begin production by 2019, would export up to 95 million tonnes per year - that's about a third of the firm's total capacity at the moment.

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Your permits are canceled, but please bid again - Guinea to Vale

Stephanie Nebehay

Reuters

30 April 2014

Switzerland - Guinea's President Alpha Conde said on Wednesday he hoped Brazilian miner Vale would bid to reclaim two iron ore permits, because the company had not been involved in the alleged corruption that led to their cancellation.

Guinea cancelled the two mining concessions jointly held by Vale and BSG Resources earlier this month, after a government-appointed technical committee accused BSGR of obtaining the rights through corruption.

BSGR, the mining branch of Israeli billionaire Beny Steinmetz's conglomerate, has denied the allegations and said it will seek international arbitration.

Conde told reporters during a visit to Geneva on Wednesday that Vale, the world's largest iron ore producer, had done nothing wrong.

"We will launch an open and transparent bidding process ... Vale was not involved in the corruption or aware of it and we strongly hope that Vale will participate," Conde said.

"Vale can come back through the bidding process," he added.

SEE ALSO: BSGR says Guinea recommends seizing mine with Vale

Vale entered into a joint venture with BSGR to mine the giant Simandou iron ore deposit and the nearby Zogota concession after the permits were already acquired and has denied any wrongdoing.

According to a source close to the company, Vale had spent more than $1 billion on its Guinean venture by the time it put the project on hold at the end of 2012.

Vale has not said whether it will try to get the concessions back and company officials were not immediately available for comment after Conde's statement.

Guinea is already the world's top supplier of the aluminium ore bauxite and its iron ore reserves have drawn billions of dollars in investments.

However, investor interest in the country has cooled amid political instability and a contract review launched in 2011 to review mining deals signed before Conde came to power.

Conde said that around 800 permits, most of them inactive, have been cancelled during the process. Eighteen contracts were still under review, he added.

He thanked Guinea's international partners for helping it investigate its mining sector.

"Even though we are weak ... the cooperation with the judicial authorities in Switzerland, the United States, France and even the tax havens kept us from being at a disadvantage. I think that is the most important lesson of Simandou," he said.

Frederic Cilins, a former BSGR representative in Guinea, was arrested last year as part of a U.S. investigation into payments made to Guinean officials to secure mining rights to Simandou.

He pleaded guilty in New York last month to one count of obstructing a criminal investigation.

With reserves of iron ore, gold, bauxite and diamonds, Guinea is potentially one of Africa's richest countries. But it remains one of the world's least developed, ranking 178th out of 187 countries in the U.N. Human Development Index last year. (Writing by Joe Bavier; Editing by David Lewis and Andrew Heavens)

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Rio Tinto accuses Vale of theft

Mining Weekly

1 May 2014

PERTH - Mining giant Rio Tinto has launched legal action against Brazilian iron-ore giant Vale, Israeli businessman Beny Steinmetz and his company BSG Resources, claiming that the three had conspired to relieve Rio of the northern half of its Simandou mining concession, in Guinea.

Rio Tinto was granted a mining concession over the Simandou project in 2006. The project is host to the world's largest untapped iron-ore deposits, and provides access to billions of tonnes of high-grade iron-ore.

In documents filed with the US District Court in New York, Rio claimed that following discussions regarding a possible purchase of some of the Simandou assets from Rio, Vale used proprietary information disclosed in the discussions to gain control of the asset by colluding with Steinmetz and the BSG group.

The diversified miner further accused Steinmetz and BSG of bribing Guinean officials, which ultimately resulted in the Guinean government rescinding half of Rio's Simandou interest in 2008, and reassigning that interest to BSG.

Rio claims that Vale continued its "double dealing" to gain further confidential information on the Simandou project, fraudulently concealing its association with BSG and Steinmetz during this time.

The Simandou negotiations between Vale and Rio ended in June 2009.

Vale subsequently bought a majority interest in BSG's Guinean subsidiary for $2.5-billion.

Rio said on Thursday that the lawsuit would not include the government of Guinea, as the company had reached a settlement in 2011 that related to the southern concession of the Simandou project.

The $20-billion southern concession was expected to produce about 100-million tonnes a year of iron-ore, one-third the size of Rio's Pilbara operations, in Australia.

Guinean President Alpha Conde had previously flagged 2015 as the start of production from the Simandou project, which has been delayed by years over a deadlock about how the massive project will be financed and executed.

At the end of April, Vale announced that the Guinean government had revoked the mining licences for the Simandou and Zotoga iron-ore projects, which was held in a joint venture with BSG.

The Brazilian miner told shareholders that the government's decision was based on fraudulent conduct in connection to the acquisition of the mining licences, but added that the Technical Committee on the Review of Mining Titles and Agreements had found that Vale had not been involved in any fraudulent conduct, and instead placed the blame squarely on BSG shoulders.

At the time of writing, the company had not released a response to Rio's court action.

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Bribery allegations in Rio's Vale lawsuit raise eyebrows in staid mining world

Peter Kennedy

Stockhouse

5 May 2014

In recent years, Canadian companies Niko Resources Ltd., SNC-Lavalin Inc. and Griffiths International Inc. reminded investors of what might be going on behind closed doors when prized assets are up for grabs.

But even grizzled veterans of the international resource scene have had their eyebrows raised by the text of a lawsuit launched by the U.K mining giant Rio Tinto PLC (NYSE: RIO, Stock Forum).

"It's a fascinating read,'' said one Vancouver resource executive who asked not to be named.

In documents filed in a New York district court on April 30, 2014, Rio is alleging that its Brazilian rival Vale SA (NYSE: VALE, Stock Forum) used confidential information obtained during meetings with Rio officials to steal part of the massive Simandou iron ore project in Guinea, West Africa.

Property disputes are almost a daily occurrence in the mining sector. But mining officials say they are startled by the aggressive language used in the lawsuit as well as the value of bribes that were allegedly paid out to officials in the Guinea government.

The complaint relates to the loss of half of Rio Tinto's mining concession (blocks 1 and 2) in 2008.

Vale acquired the rights to 51% per cent of the northern half of the project in 2010 by agreeing to pay $2.5 billion to companies tied to Beny Steinmetz, an Israeli-born diamond trader who had allegedly paid bribes to the Guinea government in exchange for rights to the site.

"Defendant Vale saw a golden opportunity not only to obtain control, but to do so on the cheap, when Vale learned that defendants Steinmetz and (his mining arm) BSG Resources Ltd. were attempting to interfere with and steal Rio Tinto's rights to the Simandou concession,'' Rio alleges in the 50-page civil action document.

Rio goes on to explain that gaining control of the Simandou deposit would strengthen Vale's position in the world's high-grade iron ore market, since the only other comparable source is Vale's own Carajas Iron Ore Mine in Brazil.

The alleged bribes took the form of a diamond-encrusted watch that was paid to the late Guinea President Lansana Conte, and a similarly encrusted Formula 1 race car that was presented to Mahmoud Thiam Guinea's former Minister of Mines.

In June 2010, Steinmetz met with Thiam in Paris. That meeting allegedly resulted in a $200 million bribe being paid to Thiam for facilitating the signing of documents that led to BSGR being granted an exploration license to Blocks 1 and 2 at Simandou.

Rio said efforts by the defendants named in the suit to conceal their allegedly "illegal and tortuous activities" ended in January 2013, when the U.S. Attorney's Office and the FBI launched a criminal investigation of potential violations of the Foreign Corrupt Practises Act.

Investigators are also looking into potential violations of anti-money laundering statutes relating to, among other things, the laundering into and through the United States of potential bribe payments to Guinean officials for the purpose of obtaining Rio Tinto's rights to Simandou, the mining giant said.

The allegations in the Rio action have yet to be tested in a court of law. There therefore the named defendants are assumed to be innocent until it is proven otherwise.

Meanwhile, in a press release announcing the civil action, Rio was careful to point out that its complaint is not against the current government of Guinea. A military junta took control of Guinea when Lansana Conte died in December 2008. The West African country is now ruled by Alpha Conde, its first democratically elected President.

Rio Tinto and the Government of Guinea signed a settlement agreement in 2011 that relates to the southern concession of Simandou, known as blocks 3 and 4, and is the location of Rio Tinto's declared iron ore resources in Guinea.

Rio and the government are now working co-operatively, Rio said.