The Simandou mountains in Guinea
holds some of the richest iron ore deposits in the world and has the potential
to transform the fortunes of the impoverished West African nation.
World number two miner Rio Tinto
is developing the southern part of the vast mountain deposit with first
production from the massive $20 billion project not expected until late 2018 at
the earliest.
The northern part of the Simandou
concession is held by BSG Resources, a company in the stable of billionaire
diamond magnate Beny Steinmetz, and Brazilian giant Vale (NYSE:VALE).
All work on the section awarded
to BSGR by a former Guinea dictator in 2008 and 50%-sold to Vale has been halted
as the government of Guinea revisits all mining contracts entered into under
previous regimes.
In the latest annual report filed
to the US Securities and Exchange Commission by Vale, the world's top iron ore
producer, the miner said it is bracing itself to lose all its investment in the
project reports FT.com:
"If the technical committee
[reviewing past mining deals] recommends revocation and the government decides
to accept that recommendation, Vale may lose its entire investment in the
Simandou project subject to any rights to recourse Vale may have," the company
said.
Vale acquired the interest in
Simandou from BSGR for $2.5 billion in 2010, but stopped payments after the
first $500 million was forked over because certain progress milestones were not
met.
BSGR pegs the money spent on
Simandou with Vale so far at about $1 billion.
Earlier in March the Guinean
committee reviewing the Simandou licences recommended the government strip BSGR
as well as Vale of their rights because the panel alleges BSGR obtained the
concession through corruption.
Vale was not accused of any
wrongdoing and BSGR has all along denied the claims maintaining that "the review
has been conducted throughout without any respect for basic due process and
procedural fairness."
BSGR was awarded the rights days
before the death of Guinea dictator Lansana Conté in 2008 after spending more
than $160 million exploring the prospect.
Conté had not long before
stripped the Simandou blocks from Rio Tinto which had held the exploration
rights since the late 1990, ostensibly over the Anglo-Australian company's
failure to develop the deposits.
The awarding of the rights are
also the subject of a separate Swiss, UK and US anti-corruption and fraud
investigations.
Source: www.mining.com
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