One day in November, 2008, two rival groups of mining executives convened for a meeting in a black office tower on the southern tip of Manhattan. They represented two of the largest mining companies in the world: Brazil’s Vale, and its Anglo-Australian competitor, Rio Tinto. Vale was interested in acquiring a stake in one of Rio Tinto’s most prized projects: a mountain range in the tiny west African nation of Guinea, which contained the planet’s richest deposit of untapped iron ore and was known as Simandou.
When they met that day, executives from Rio Tinto acknowledged that their legal claim to Simandou was under threat. In the summer of 2008, the government of Guinea had rescinded its right to develop the concession, and a new player had emerged on the scene: an Israeli billionaire named Beny Steinmetz, who had made his name in the diamond trade and now had designs on Simandou.
The negotiations between Vale and Rio Tinto eventually fell apart, but Rio Tinto’s concerns turned out to be well founded. Guinea granted Steinmetz’s company, B.S.G.R., exploration rights to half of the Simandou deposit. Then, in 2010, B.S.G.R. announced that it was forming a joint venture to develop the ore—with Vale. The leadership at Rio Tinto was incensed: not only had they lost half of their precious asset to Steinmetz but he had then gone into business with their chief competitor, with whom they had only recently been negotiating a joint venture themselves.
Last year, I wrote a long account for the magazine about what happened next: Guinea elected a new President, Alpha Condé, in 2010, and his government began to investigate the manner in which Steinmetz, a relatively small operator who had no experience mining iron ore, had acquired his rights to Simandou. Guinea has a long legacy of predatory political corruption, and the Condé government came to suspect that Steinmetz had succeeded in winning the prize chiefly through the liberal distribution of bribes. Steinmetz has fiercely disputed any charges of corruption, but this spring Guinea’s government concluded its investigation, maintaining that B.S.G.R. did indeed secure the claim through bribery, and Guinea proceded to strip both Steinmetz and Vale of their stake in Simandou.
When a multibillion-dollar deal collapses, the ensuing recriminations can get spectacularly ugly. B.S.G.R. condemned the process in Guinea as illegitimate—an effort to “expropriate” its asset. The company has vowed to pursue arbitration against Guinea. Vale, meanwhile, initiated its own legal action against B.S.G.R. this month, on the theory that Steinmetz had duped it into purchasing what the government of Guinea now maintains was, effectively, a stolen good. Vale had committed to pay Steinmetz $2.5 billion for half of his share in Simandou; the company is seeking to recoup an initial payment to B.S.G.R. of five hundred million dollars, plus the further investments it made in the project, for a total of over a billion dollars.
President Condé has said that Vale is not to blame for the allegedly crooked dealings of its partner, and when the portion of the deposit that has been taken from Steinmetz and Vale is put up for bidding again, Vale is welcome to make an offer.
But, while I was reporting my story, I often wondered how a major, publicly traded mining company like Vale could have been so naïve as to enter into the deal with Steinmetz without looking into the manner in which he came by the mineral rights. A recent investigation by the Brazilian magazine Revista Piauí presses precisely this question. Roger Agnelli, who was Vale’s C.E.O. at the time and engineered the deal with B.S.G.R., insisted in an interview that he had no whiff of suspicion. “Vale did what it had to do, and at the time there was nothing to discredit Beny,” he said. He added, more colorfully, “A guy can marry a former hooker and only discover years later that his wife used to be a prostitute.”
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