Brazil’s Vale (NYSE: VALE), the world’s No. 1 iron ore
miner, has launched a legal action in New York to determine whether funds paid to
BSG Resources within the framework of their former Simandou partnership in
Guinea were used for property investments in the United States.
The Rio de Janeiro-based mining giant alleges that BSGR,
diamond tycoon Beny Steinmetz’s mining arm, fraudulently funnelled $500 million
into Manhattan real estate’s magnates Aby Rosen and René Benko, Africa
Intelligence reported.
The case is the latest in a series of efforts Vale has made
to have BSGR pay a $1.2 billion arbitration award. The amount was granted to
the Brazilian miner on the grounds of “fraud and breaches of warranty” when
including it in the Simandou iron ore joint venture.
At two billion tonnes of iron ore with some of the highest
grades in the industry, Simandou is one of the world’s biggest and richest
reserves of the steelmaking material, but it has a controversial past.
For more than a decade, it was the centre of a bitter
dispute that involved Rio Tinto, Vale and BSGR.
It began in 2008, when one of Guinea’s former dictators
stripped Rio’s rights over two of the four blocks the deposit had been divided
on and handed them BSGR. Rio was able keep to the two southern blocks, but only
after paying $700 million to the government in 2011. The deal guaranteed the miner
tenure for the lifetime of the Simandou mine.
Vale steps in
Vale came into the picture when it acquired a 51% stake in
the northern half of Simandou from BSGR for $2.5 billion. Later, Guinea revoked
BSGR’s project rights due allegations of bribery and corruption accusations surrounding the deal to acquire the
rights.
BSGR and Steinmetz were able to put an end to the series of
issues stemming from Simandou in February last year, through a deal with Guinean President Alpha Conde.
As part of the agreement with Guinea, BSGR agreed to walk
away from blocks one and two of the Simandou project, but retained the right to
mine the smaller Zogota deposit.
A few weeks later, a London arbitral court ordered BSGR to
pay $1.2 billion to Vale. The judge based its decision partly on the fact that
the government revoked the concession in 2014 after finding that BSGR
had obtained it by bribing officials.
In November 2019, Steinmetz’s company lost an appeal to
overturn the arbitration award it was ordered to pay Vale.
Simandou today
Rio Tinto currently holds a 45% stake in blocks three and
four of Simandou, which it is actively planning to develop. China-controlled Chinalco
owns 40% and the Guinea government 15%.
Both companies are said to be trying to persuade authorities to let them use ArcelorMittal’s railway to a port in neighbouring Liberia.
A joint venture between Guinea’s Société Miniere de Boke
(SMB) and Singapore’s Winning International Group is
close to securing approval from Beijing to start developing Simandou’s
northern blocks.
China’s resource dependence on Guinea has increased in
recent years. In 2017, Beijing agreed to loan President Condé’s administration
$20 billion over almost 20 years in exchange for bauxite concessions.
Analysts say Guinea’s population has so far seen little
benefit from Chinese investment.