Vale is weighing legal action after Guinea formally cancelled multi-billion-dollar iron ore rights that the Brazilian mining group held jointly with Israeli tycoon Beny Steinmetz’s family conglomerate following a two-year corruption inquiry.
The revocation of the rights came two weeks after a government inquiry in the west African nation concluded that BSG Resources, the mining arm of Mr Steinmetz’s business empire, won them through a bribery scheme before agreeing to sell a majority stake in its Guinean assets to Vale for $2.5bn in 2010.
Vale, the world’s biggest iron ore miner, said on Friday that it was “actively considering its legal rights and options”. A spokesperson for the group declined to elaborate on its plans on Sunday.
BSGR denies wrongdoing and says it is the victim of a plot to seize its assets. The Guernsey-registered company has said it will “prove the allegations raised in Guinea’s rigged and illegitimate process are false” and has threatened to take Guinea to international arbitration. BSGR declined to comment on Vale’s statement.
The Guinean inquiry concluded that BSGR won its mining rights through a bribery scheme involving the fourth wife of the late dictator, Lansana Conté. Shortly before his death in late 2008, rights to half of Simandou, one of the world’s richest undeveloped iron-ore deposits, were stripped from rival miner Rio Tinto and granted to BSGR.
Vale agreed in April 2010 to buy a 51 per cent stake in Simandou and BSGR’s other Guinean prospects for $2.5bn. It paid $500m up front but has not paid the balance, which was due to follow as development targets were met. The Guinean government ordered work on the project to stop in 2011 and the following year Vale said it had put the project on hold.
Last month, Vale warned that it could lose its entire investment in Guinea – which it values at $1.1bn – if the government cancelled the joint venture’s rights.
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