* Strategic committee has to make final decision
* BSGR denies charges, may start international arbitration
* Vale risks losing more than $1 billion invested in Guinea
By Silvia Antonioli, David Rohde and Saliou Samb
LONDON/CONAKRY, March 7 A technical committee in
Guinea has recommended the government strip BSG Resources (BSGR)
and its partner Vale of the rights to exploit a giant iron ore
deposit because the panel alleges BSGR obtained the concession
through corruption, sources close to the matter said.
The latest development in a saga surrounding one of the
world's largest mining deposits casts uncertainty over the
future of the sought-after Simandou, a mine that could help one
of Africa's poorest countries to prosper.
It also raises concerns over the position of Brazilian miner
Vale, which, according to a source close to the
company, has spent more than $1 billion in its Guinean venture
and risks seeing its investment and efforts wiped away.
BSGR vigorously denied the allegations of wrongdoing and
said it believes the committee's procedure is part of a
predetermined and orchestrated plan to expropriate the company's
"The review has been conducted throughout without any
respect for basic due process and procedural fairness," a BSGR
spokesman said on Friday.
The committee's report has no substance or sufficient
evidence to support its recommendations, the spokesman said.
Vale, which has not been accused of any wrongdoing,
declined to comment.
Nave Toure, president of the technical committee, told
Reuters it had not yet submitted its recommendations to the
strategic committee which is due to make a final decision.
He added that his committee did not have the authority to
decide on handing mining rights to a third party.
"(The technical committee) does not have the authority to
make recommendations that concern the reallocation of any mining
title, as this is decided by the mining department as is stated
in the mining code."
Under President Alpha Conde, Guinea launched a review in
2012 intending to shed light on certain mining concessions
granted under previous administrations.
In a report prepared after months of hearings and
investigations, Guinea's technical committee recommends the
government re-tender the rights on the northern portion of
Simandou, three sources said this week.
The committee alleges BSGR used corrupt practices to help
obtain the concessions in 2008.
BSGR sold 51 percent of its Guinean assets to iron ore giant
Vale in 2010, when they created a joint venture named VBG.
The committee proposes "that the proper authorities take all
useful measures so that VBG company, the holder of the titles
and agreement in question, and the companies that were the
source of these corrupt practices, i.e. BSGR and the companies
owned or controlled directly or indirectly by the BSGR group,
will be barred from the procedure of re-awarding the titles and
the agreement covered under these recommendations", one source
quoted a letter from the technical committee, summarising the
report, as saying.
Guinea government spokesman Damantang Albert Camara said the
work of the technical committee was based on serious and
convincing evidence and denied any predetermined or orchestrated
plan to damage BSGR.
"Guinea only wants one thing: to defend its interests and
have mutually profitable relations with investors who choose to
come here," the government spokesman said.
LIKELY LEGAL BATTLE
The report recommends VBG be banned from reapplying for the
rights but the sources said the government would be likely to
grant Vale permission to take part in any new tender.
Other mining companies such as Rio Tinto and BHP
Billiton have also expressed interest in taking part in
such a tender, sources said.
The letter summarising the findings of the technical
committee's report was sent to VBG for any final comments and
the report is expected to be published later this month, the
The strategic committee, which will make the final ruling,
is headed by President Conde - elected in 2010 in Guinea's first
free vote after 50 years of one-man rule and two years of a
BSGR said it intends to fight for its mining rights in
Guinea and any effort to revoke or diminish them will be met
with an international arbitration claim, a lengthy and costly
process that could further delay development for the country.
Reissuing the license could fetch up to $3 billion,
according to Guinea's president, a tempting option for a nation
with a $7 billion economy.
However, a source at a large mining company estimated that
in the current environment of weakening iron ore prices and poor
appetite for large, risky mining projects, the concession would
fetch only up to $1 billion and only if certain logistic
conditions were agreed.
He said Guinea should allow ore exports through a shorter
route that crosses neighbouring Liberia, rather than Guinea,
vital to make the project economical at lower iron ore prices.
Simandou, one of the deposits with the highest iron ore
grades in the world, has attracted interest from some of the
largest miners in the past.
Anglo Australian miner Rio Tinto spent
millions trying to develop the whole project until 2008, when
Conte's government revoked its permit on the northern half and
transferred the rights to BSGR, arguing Rio had moved too
Rio pledged this week to press ahead with finalising an
investment framework for the southern portion of the
long-delayed Simandou iron ore project and said it would seek
ratification from parliament as soon as possible.