UPDATE 2-BSGR starts arbitration against Guinea over lost mining rights

(Adds government reaction, paragraph 3)

LONDON, May 7 (Reuters) - BSG Resources (BSGR), the mining unit of Israeli billionaire Beny Steinmetz’s business conglomerate, said on Wednesday it had sought arbitration over the government of Guinea’s decision to revoke its mining rights in the country.

The company said it filed a notice of dispute at the International Centre for Settlement of Investment Disputes seeking the restitution of the mining titles as well as damages arising from the revocation of the rights.

A spokesman for the Guinean authorities, however, reiterated the government’s position that it acted legitimately.

Guinea’s government cancelled mining rights held by VBG, a joint venture between BSGR and miner Vale, over the Simandou and Zogota iron ore deposits last month, after a government panel charged with reviewing the West African nation’s mining deals said in a report it had found BSGR obtained the rights through “corruption” in 2008.

BSGR has repeatedly denied any wrongdoing.

It got mining concessions to develop the northern half of Simandou, one of the world’s largest iron ore deposits, and Zogota in 2008, when Guinea former President Lansana Conte took the rights away from Anglo-Australian miner Rio Tinto, telling Rio it had moved too slowly.

BSGR then sold 51 percent of its Guinean assets to Brazil’s Vale in 2010, when they created joint venture VBG in a $2.5 billion deal.

Guinea has said there will be a new bidding round to choose the new owners of the permits.

“BSGR has given notice that anyone, whether it be the Guinean government, Vale, Rio Tinto or anyone else who has negotiated an interest in Simandou or does so in the future will be dealing unlawfully in BSGR’s property,” the company said in a statement which summarized the argument for the filing.

“In such circumstances BSGR will look to take immediate steps to litigate against those parties who wrongfully interfere in its lawful interests,” it said.

Guinea’s government spokesman Damantang Albert Camara said the state was not troubled by the move.

“Whatever BSGR’s process to try to recuperate its permits, we remain convinced that we are well within our rights. We remain, therefore, more determined than ever to protect our country’s mining assets,” he told Reuters. (Additional eporting by Saliou Samb in Conakry; Editing by Joe Bavier and David Gregorio)