BSG Resources now chased for $2 billion by Vale over Guinea deal corruption ruling

24 April 2019 00:00 by Martin Coyle

Miner BSG Resources now faces a demand for more than $2 billion from Brazil's Vale in damages and costs over corruption claims linked to a massive iron ore deal in Guinea.

Vale yesterday filed an application to a court in New York seeking enforcement of an order made by a London arbitration court earlier this month that BSGR should pay the iron ore producer $1.25 billion.

In its New York filing, Vale is seeking not only the $1.25 billion awarded, but also more than $0.75 billion in other costs.

Vale scored a significant win earlier this month when the London Court of International Arbitration found that BSGR, owned by Israeli tycoon Beny Steinmetz, had “falsely” represented that it hadn’t engaged in bribery or corruption linked to the 2010 Guinea deal.

Vale said it has now gone to the US District Court for the Southern District of New York to ask it to enforce the UK arbitration court’s award because BSGR has property and at least one bank account in New York.

— Disputed deal —

The dispute between BSGR and Vale centers on a joint venture between the companies to develop one of the largest untapped iron ore deposits in the world, the Simandou mine, in eastern Guinea.

Vale paid BSGR billions of dollars for a majority share of the mine and other Guinea assets after seeking assurances that the company hadn’t engaged in bribery to secure the mining rights from the African nation’s government.

Guinea revoked the mining concession in 2014, claiming that BSGR had used bribery and corruption to secure the mining rights.

In its New York filing yesterday, Vale said the London court had found BSGR liable for “fraudulent misrepresentation.” BSGR made a “litany” of false statements during the company’s due diligence on the mining deal, Vale said.

According to Vale, BSGR failed to disclose all of the agents it used in Guinea deal, and the fact that they had bribed Mamadie Touré, the wife of former Guinean president Lansana Conté. It also made payments to Guinea’s former finance minister Ibrahima Kassory Fofana, the court papers say.

“BSGR falsely represented to Vale that it had no financial relationships with government officials or their spouses and that it had not made any payments to government officials in connection with obtaining the mining rights,” according to the filing.

“BSGR falsely represented to Vale that it had not engaged in bribery or corruption, including in due diligence questionnaires and a written anti-bribery certification from Steinmetz himself that BSGR had not engaged in any bribery or corruption.”

— Court actions —

BSGR has been involved in a slew of court cases revolving around its Guinea mining deals. In 2014 it filed an arbitration claim against the Republic of Guinea with the International Centre for the Settlement of Investment Disputes, saying mining permits and concessions were improperly revoked. That arbitration case is ongoing.

Also in 2014, Vale, Steinmetz and some of his companies, including BSGR, were named as defendants in a US lawsuit brought by Rio Tinto. The Anglo-Australian miner claimed that Vale and Steinmetz conspired to misappropriate its mining rights in Guinea. Rio Tinto said that Steinmetz engaged in bribery to acquire the rights. The suit was dismissed the following year, with the judge saying it was time barred.

In 2017 BSGR sued George Soros and his Open Society Foundations, claiming that Soros “tortuously interfered” with BSG's mining interests in Guinea, costing the company billions of dollars.

BSGR alleged that Soros's actions resulted in Guinea ending a mining agreement with it for rights to the Simandou iron ore deposit and that Soros defamed BSGR by making references to alleged corruption on the part of BSGR in Guinea.

BSGR has previously denied any wrongdoing in relation to its Guinea deals.

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