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Rio Tinto Sues Vale and BSGR Over Iron Ore Rights in Guinea

Rio Tinto has recently filed a complaint against rivals Vale and BSG Resources, including BSGR owner and Israeli billionaire Beny Steinmetz, over conces...

|May 2|magazine8 min read

Rio Tinto has recently filed a complaint against rivals Vale and BSG Resources, including BSGR owner and Israeli billionaire Beny Steinmetz, over concessions at the prospective Simandou mine in Guinea. This move has touched off one of the largest legal battles in the mining sector in years.

Simandou is one of the most valuable iron ore deposits in the world, and could potentially help one of Africa’s poorest countries become a more developed nation; unfortunately, the mine has been paralysed by battles over concessions for years.

Rio Tinto lost half of the rights to Simandou in Guinea in 2008. Former President Lansana Conte’s government revoked Rio’s permit on the grounds that the mining company had been progressing too slowly towards full operation. Since then, Rio has maintained that it had complied with the terms in its lease of the northern region of Simandou.

After pulling Rio’s permit, the government transferred it to BSGR. This mining branch of Steinmetz’s conglomerate in turn sold 51 percent of the sites assets to Brazil’s Vale in 2010. Recently, the current Guinean government stripped the tenements from BSGR and Vale based on the report from a government panel that was charged with reviewing the West African nation’s mining deal.

The report came to the conclusion that BSGR had obtained its rights to Simandou through corruption. In an attempt to distance the company from the accusation Vale filed a billion-dollar action against BSGR before the London Court of International Arbitration earlier this week.  

Rio Tinto followed with a suit a few days later, claiming both companies, Steinmetz and a few government officials were involved in Rio’s loss of the northern section of Simandou in 2008 via a conspiracy that included the use of “highly confidential and proprietary information” to devise a fraudulent scheme.

"Rio Tinto's injuries are clear and definite and include the loss of billions of dollars in assets, as well as the lost investment of its activities in Simandou," Rio said in the filing. "This is a case about the theft of Rio Tinto's valuable mining rights by the defendants through a scheme in violation of the Racketeer Influence and Corrupt Organizations Act.”

Although Guinea’s current president, Alpha Conde, has come forward to say that Vale had nothing to do with the alleged corruption, Rio Tinto made it clear in their lawsuit that they believe Vale was at the heart of the conspiracy. The lawsuit also calls out Mahmoud Thiam for allegedly accepting millions of dollars in bribes from BSGR owner Steinmetz, and for facilitating the transfer of mining license to BSGR.

So far, Steinmetz has vehemently denied the charges and is seeking international arbitration; Vale has declined to comment.

Rio Tinto’s settlement will be in the billions, but a specific number is not known at the current time. They claimed that they had spent hundreds of millions trying to develop Simandou until 2008, and have lost billions in assets because of the loss of the mine. Full production of Rio’s southern Simandou mine will begin in 2019, with exports of up to 95 million tonnes of ore a year – a third of the company’s total current capacity.