Guinea says BSG lawsuit threat "insulting"

CONAKRY, Sept 25 Tue Sep 25, 2012 11:01am EDT

CONAKRY, Sept 25 (Reuters) - Mining firm BSG Resources' threat to sue investment bank BTG Pactual over alleged misdealings with Guinea's government is "insulting, fantastical, and contradictory", the country's Presidency said on Tuesday.

BSG is developing a portion of Guinea's Simandou iron ore project with partner Vale, though tensions have risen with the government over the financing of infrastructure and a revamp of the West African state's mining code.

A newspaper in Brazil reported on Sunday that BSG was preparing to sue BTG Pactual, which it accuses of misusing its role as an adviser to Guinea's government to win licenses for a holding company at BSG's expense.

BSG is owned by Israeli billionaire Beny Stenmetz. A BSG official in Conakry said he was not aware of the plans for a lawsuit, and other BSG officials were not immediately available to comment.

"The allegations are at once insulting, fantastical, and contradictory," Mines Minister Mohamed Lamine Fofana said in an email forwarded to Reuters by Guinea's Presidency. "The negotiations underway between the state and potential partners are happening in a perfectly legal, open and transparent manner," he said.

He added that Guinea was consulting BTG Pactual and B&A, a holding company BTG Pactual formed with partner AGN Participacoes, for financing of a trans-Guinean railway line that would link Simandou to port.

He said the talks did not pose a threat to the Simandou blocks operated by the BSG and Vale joint-venture.

Guinea is the world's top supplier of the aluminum ore bauxite and holds rich deposits of iron ore, but the country is struggling to maintain foreign investment amid deepening political turmoil, labour unrest, and a government review of mining contracts.

Brazilian mining giant Vale initially held the contract for upgrading the trans-Guinean railway line, but the deal was canceled by President Alpha Conde after he was elected in 2010. Rio Tinto, which is developing another part of Simandou along with joint venture partner Chinalco, is also interested in the contract.

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