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Steinmetz-Vale venture may lose Guinea mine rights

Wednesday - 4/9/2014, 3:50pm  ET

BOUBACAR DIALLO
Associated Press

CONAKRY, Guinea (AP) -- A watchdog in Guinea urged the government on Wednesday to revoke the mining rights to one of the largest untapped iron ore deposits in the world, a deal that is also under investigation in the U.S.

The state-sponsored committee for reviewing mining concessions said an 18-month-long investigation found evidence that the rights to exploit the Simandou and Zogota deposits were obtained through corrupt practices. In its report, the committee specifically accuses representatives of Israeli billionaire Beny Steinmetz's energy company, BSG Resources, of promising bribes in exchange for exploitation rights.

The Guinean government must now decide whether to cancel the agreement, which is worth billions of dollars and has been called the "deal of the century."

American authorities are also investigating the deal for potential violations of the Foreign Corrupt Practices Act and possible money laundering. An associate of Steinmetz pleaded guilty last month in U.S. federal court to obstructing the investigation. Some of the evidence cited in the Guinean report was collected by FBI wiretaps.

BSG Resources denies all the allegations.

The company that currently holds the rights, known as VBG, is a joint venture between BSG Resources and the Brazilian mining company Vale. But the report's accusation focus largely on BSG, and many of the events mentioned took place before Vale took a stake. In its 2013 annual report, Vale said it did not believe the committee had accused it of wrongdoing. On Wednesday, the company refused to comment further.

Guinea is a mineral-rich but deeply impoverished country, and corruption has long plagued its attempts to exploit its natural resources and raise its citizens out of poverty. The country has the world's largest repository of bauxite, but annual gross domestic product per capita is just $1,100.

The Guinean committee said it is conducting a general review of mining concessions to check if they were awarded legally and insisted that the investigation into VBG is no different from any other. It added that its findings are merely a recommendation and that the government acts independently.

But BSG Resources said in a statement on its website Wednesday that the allegations rely on fabricated claims and accuses the committee of doing the government's dirty work. It says that Guinean President Alpha Conde wants to take back the mining rights in order to hand them out to his political cronies.

Global Witness praised the report.

"It is rare that the mechanics of corrupt deals are laid bare so clearly, showing how opaque mining deals can short-change the world's poorest nations," said Daniel Balint-Kurti in a statement from the international environment and corruption watchdog.

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DiLorenzo reported from Dakar, Senegal. Associated Press writer Stan Lehman in Sao Paulo, Brazil, contributed to this report.


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