BSG Resources, Vale Face Loss of Guinea Licenses -- Update

By Alexis Flynn 

LONDON--A Guinean government committee set up to probe the country's mining deals has recommended that BSG Resources Ltd. and Vale SA be stripped of their rights to the Simandou iron-ore project, potentially putting one of the world's most sought-after mineral deposits back into play.

In a final report filed after a three-year investigation, the committee--made up of Guinean government bureaucrats--wrote that they found there was "precise and coherent evidence" that Africa-focused BSG Resources had obtained the rights to Simandou--in which it subsequently sold a share to Brazilian giant Vale--through corruption, according to a copy of the report reviewed by The Wall Street Journal. The committee, in its report, alleges that BSG Resources had used local intermediaries to bribe one of former President Lansana Conte's wives in a bid to secure mineral rights in the West African nation.

BSG Resources disputed the committee's findings and said it would pursue international arbitration to protect its interests. It also accused President Alpha Conde, who set up the committee to probe mining deals shortly after coming to power, of seeking to expropriate the stake by stealth.

"BSGR will prove these allegations are false. The Guinean government is relying on fabricated claims, compromised witnesses and illegitimate processes," said a BSG Resources spokesman.

"The next step is international arbitration where the evidence can be aired in a proper forum and BSGR can establish the truth."

The committee wrote in its report that Vale has denied any wrongdoing to investigators, and the company said any alleged impropriety would have preceded its involvement in the project. Vale agreed to pay BSG Resources $2.5 billion for a 51% stake in the project in 2010.

The committee recommended that BSG Resources, the mining arm of Israeli tycoon Beny Steinmetz's family conglomerate, be barred from participating in any re-tendering of the licenses. However, it didn't recommend that Vale be similarly barred.

Write to Alexis Flynn at [e-mail]

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