“High Noon at the Guinea Corral,” by David Gleason: Are Steinmetz and Soros at Each Other’s Throats? Did South African Backers Help Conde Steal 2010 Election? Did Rio Tinto Pay $700M Bribe to Guinea to Hold on to So. Simandou?

High Noon at the Guinea Corral

by David Gleason

IF THERE was a sliver of doubt, there cannot be any longer — George Soros and Beny Steinmetz are at each other’s throats and this isn’t going to end happily for one of them.

Of the two, Soros is better known. A multibillionaire (I’ve seen numbers like $30bn), he rose to international fame (and infamy in Britain) as the man who shorted more than $10bn in sterling, triggering the UK’s withdrawal from the European Exchange Rate Mechanism, prompting a devaluation of the pound and earning himself $1.1bn. A Hungarian nonpractising Jew, Soros, 83, has been married twice and is currently courting Tamiko Bolton, 40, a New York pharmacist.

Beny Steinmetz, 56, allegedly Israel’s richest man, is said to be worth about $6bn. He inherited the Geneva-based Steinmetz Diamond Group from his father and later formed Beny Steinmetz Group Resources, also Geneva-based but managed out of London.

The Steinmetz Diamond Group continues to be diamond giant De Beers’s largest sightholder.

Steinmetz is a commercial hurricane. He rarely stays in one place for long. He’s a legendary deal-maker and I’m sure he has been burnt frequently.

Of course, buying, polishing and selling diamonds isn’t at all the same as developing a major mining operation. I am not at all certain as to what it was that persuaded Steinmetz to shift gear so dramatically.

A long article in The New Yorker (July 8) quotes Paul Collier of the Centre for the Study of African Economies at Oxford as taking “a dim view of businessmen like Steinmetz who have secured rights to natural resources they may not actually have the expertise to develop.”

That’s such a crappy observation I cannot believe an adviser to UK Prime Minister David Cameron would make it. I can think offhand of many men who did exactly that — Cecil John Rhodes, Ernest Oppenheimer and others. The issue revolves around the Simandou iron ore deposits in south-central Guinea, a large area containing what may be the largest high-grade undeveloped continuous iron-ore body in the world.

It is where most miners would not want it to be. Guinea is grossly undeveloped, its peoples mired in poverty, probably worse off now than when its first president, the irrational Sekou Touré, gave the French the boot and then proceeded to lock away in concentration camps and murder all those he thought might oppose him.

Touré died in 1984 but nothing got any better.

Meanwhile, along came mining house Rio Tinto, which qualifies in Collier’s book as able to develop a project. Rio secured the mining rights to Simandou north and south in 1997. It did nothing with them, and probably deep-froze them to hold off competitors while it developed its operations in the Western Australian Pilbara.

Steinmetz was given two unconnected areas, one north of Simandou, the other south.

The northern site wasn’t worth persevering with, but the south revealed an entirely new deposit, henceforth called Zogota.

When Touré’s successor Lansana Conté died in 2008, a military junta led by Moussa Dadis Camara, an army captain, took power. Dadis brought technocrats into the cabinet, one of them Mahmoud Thiam, to serve as minister of mines.

Thiam and his sister were smuggled out of Guinea during Touré’s reign — his father died in one of Touré’s concentration camps. Thiam was educated in the US, obtained an economics degree from Cornell University and went on to work for Merrill Lynch and UBS.

Accused in The New Yorker of being a Steinmetz champion, it was Thiam who told Rio Tinto it wasn’t complying with the terms of its mining leases. He stripped the company of its northern Simandou licence and awarded it to Beny Steinmetz Group Resources on the grounds that it had discovered the Zogota deposit.

Predictably enough, Rio Tinto was enraged. It claims it invested heavily in Simandou, but the time frame belies that — it doesn’t take nearly 12 years to start developing an iron-ore deposit, or begin rebuilding a railway line, or begin developing a deep-water port, at least some of which would be undertaken with international financing.

A number of things then transpired. Not in any order, the Guineans finally held an allegedly open, free, election. Alpha Condé, 72, who had lived outside Guinea for 50 years, won 18% in the first round. His principal opponent Dalein Diallo won more than 45%. In the delayed second round, Condé suddenly appeared with 53% and Diallo with 47% — an about-term in fortunes that invites deep suspicion.

It was at this juncture that stories began to emerge that South Africa had provided financial support (said to be about $18m) to Condé, used to help finance a South African company, Waymark Infotech, which provided election management. Stories circulated that Soros and South African companies were providing “advice” and, in one case (Palladino) $25m to Condé’s new government and that organisations financed by Soros had become prominent.

The latest twist in a story that is fast providing a slew of plots for thriller novelists is that Steinmetz’s group allegedly prevailed on Mamadie Touré, the fourth wife of the dying previous president, Lansana Conté, to procure the mining licence for Simandou. They allegedly provided her with money, diamonds and a guaranteed 5% stake in Simandou. She revealed all this to a curiously and conveniently unnamed cabinet minister.

A wire worn by Mamadie Touré recorded a damaging discussion in Jacksonville, Florida, between her and Frédéric Cilins, said to have orchestrated the bribes, and to have been close to Steinmetz. The FBI was listening. Cilins was arrested and released on $15m bail.

Meanwhile, Rio Tinto sold a portion of its southern Simandou licence to the Aluminium Company of China for $1.7bn and then paid $700m to the Guinean government in return for a guarantee that no further action would be taken against it.

What will happen now? Did Condé steal the election with help from backers in South Africa? Did Beny Steinmetz Group Resources bribe Guineans to get the licence? Did Rio Tinto pay an effective $700m bribe to hold on to southern Simandou? There’s lots more — but no space.

Who is your money on — Soros or Steinmetz?

Rio Backs $21bn Guinea Play Despite Soaring Costs

• by: MATTCHAMBERS
• From: The Australian
• June 19, 2013 12:00AM

RIO Tinto appears committed to building the $US20 billion ($21bn) Simandou iron ore project in Guinea if it can iron out some issues with government, despite its pledge to rein in capital spending and pay down debt.

The company is also giving investors the impression it will not be exporting from the project in 2015, which is in line with what Guinea’s Mining Minster said recently but contradicts comments from the country’s President, Alpha Conde.

In a presentation to investors, Rio’s head of minerals and diamonds, Alan Davies, said if an investment framework and financing agreement could be secured, Rio would add to $US3bn already invested in Simandou, where estimated costs are said to have blown out to double previous $US10bn expectations. “Investment will proceed once a robust investment framework is finalised (and) partner and project financing strategy is secured,” Mr Davies told investors this week.

Guinea to award Simandou iron ore project to Chinalco

Guinea to award Simandou iron ore project to Chinalco

By: SEM Contributor on May 5, 2013.

It seems the government of the West African state of Guinea may be prepared to give a big stake of its iron ore reserves to Chinalco after reports of falling out with Rio Tinto. Senior politicians in the country are with the view that Rio Tinto have been in Simandou for many years and have done nothing but dish out money to expatriates with little or nothing to show for the time spent on the mines. The government has privately expressed dissatisfaction at how Rio Tinto has conducted its operation in the country and are seriously considering other options.

 The iron ore project is vital to the Guinean economy and authorities are keen on handing over operations to a reputable company with a proven track record in the mining industry. Chinalco had been a minority shareholder in the project, but have demonstrated immense interest in taking the project to another level, with intent to create jobs and wealth to boost the economy.

The Guinean government has been encouraged by how a smaller company like African Minerals Limited, operating in Sierra Leone, and driven by the Romanian businessman Frank Timis, could build such a huge operation at the Tonkolili mine with only $2 billion investment, including a port and rail network facility in just under 3 years, something that has enhanced the GDP of neighbouring Sierra Leone.

 Pressure continues to be piled on Rio Tinto to give a major stake to Chinalco, as Guinea’s president believes the only company capable of building Simandou is Chinalco with the assistance of the Chinese. African Minerals continues to be a major force in the African mining industry and has made head waves in its contribution to the socio-economic development of the communities around its operations.

By Ahmed Kamara

Rogue State Headlines: Guinea Gov’t Says Security Forces Not Carrying Guns During March, Arrest of UFDG Opposition Youth Leader, Bailo Diallo, and South African Miner Eyeing Simandou Iron Ore Project

Government Denies Responsibility for March Shootings

The Security Minister said today that the government is not responsible for shooting opposition demonstrators because security forces were not carrying guns during the march. Six people were shot with live rounds on April 25, one died, Boubacar Diallo, 16. Note that several march participants said that police in civilian clothes infiltrated the march.

Security Minister Cisse said and later echoed by Governor of Conakry, Sekou “Resco” Camara, the government is bringing in a ballistics expert from the international area to determine the origin of the live rounds. The Guinean government has already exhibited its ability to swindle things of an international nature. UN representative, Said Djinnit found this out when the Guinean government passed off its pick for international dialogue facilitator as someone who was approved all parties . . .not. A shameless government, like Conde’s, does not announce bringing in an international ballistics expert only to have it point to its security services as the culprits.

Actually,Conde has a smorgasbord of state-sponsored forces at his disposal which he has spent a lot of time building up just for moments like opposition demonstrations. The opposition should demand that the investigation into the origin of live rounds be extended beyond the security services into Conde’s increasingly vast “irregular forces.”

Conde increasingly uses mercenaries and ethnic militias (Malinkes) trained in Angola to supplement security forces. During the march, opposition demonstrators reported that RPG Malinke militia members were evident along the perimeter of the march. A few of the injuries to opposition participants included stabbings, a preferred mode of attack by Donzos,or hunters, from the Forest region of Guinea. Before the government forces can be cleared of culpability, they have a large number of mercenaries and militiamen to check out.

UFDG Youth Leader, Bailo Diallo, Arrested

Bailo Diallo was pulled out of a taxi three days ago and taken to a police station in Matam. His condition and circumstances are not apparent. What was he arrested for? In Conde’s Guinea, being with the opposition and being a Peul, is sufficient.

South African Mining Magnate Eyes Simandou Iron Ore Project

After all the focus on BSRG for its shenanigans during the presidency of Lansana Conte to acquire mining rights associated with the Simandou iron ore project, it looks like a South African miner, Patrice Motsepe, owner of South African Rainbow Minerals likes what he sees at Simandou. Motsepe, South Africa’s first black billionaire has been in discussions with Guinean officials and states that, in addition to iron ore, he is interested in building infrastructure to go with it.

One day, we will know more about Conde’s South African connections, especially about Waymark, promises to Jacob Zuma, and the real reasons behind the Simandou drama that might lead to Motsepe’s making a move into Guinea’s world of lucrative mining. For full article: Motsepe eyes Guinea’s iron ore industry

US Arrests “Agent” of Steinmetz (BSGR) for Violations under the Foreign Corrupt Practices Act Associated with Guinea’s Simandou Mine

SIMANDOU MINE -GUINEA

US arrests man linked to Israeli tycoon operations

By REUTERS

04/16/2013 06:01

FBI nabs French national who worked on behalf of BSG Resources on suspicion of corruption in Guinea mining operations.

NEW YORK/LONDON – FBI agents have arrested a man who worked as a representative of Israeli billionaire Beny Steinmetz‘ operations in Guinea, as part of a US probe into alleged corruption in the mineral-rich West African country.

BSG Resources, the mining arm of Steinmetz’ conglomerate, is currently battling the African nation over the right to mine one of the world’s largest untapped iron-ore deposits, known as Simandou. It has repeatedly denied Guinean government allegations that it paid bribes to the country’s former ruler to obtain the huge concession.

Frederic Cilins, 50, a French national named by the government of Guinea as “an agent” for BSG Resources, was arrested in Florida on Sunday by the Federal Bureau of Investigation. He was charged with obstructing a criminal investigation, tampering with a witness and destruction of records, the US Department of Justice said on Monday.

US authorities in January began investigating potential illegal payments made to obtain mining concessions in Guinea and transfers of those payments into the United States. The Foreign Corrupt Practices Act allows US officials to pursue bribery cases abroad.

“Mr. Cilins is charged with scheming to destroy documents and induce a witness to give false testimony to a grand jury investigating potential violations of the Foreign Corrupt Practices Act,” said Acting Assistant Attorney General Mythili Raman. The obstruction charge carries a maximum penalty of five years in prison, the Justice Department said, and the tampering and record-destruction charges each carry up to 20 years.

Neither Cilins nor an attorney could be reached for comment after news of the arrest. A BSG Resources spokesman said the group had no immediate comment.

“We are aware that US authorities have arrested an associate of Beny Steinmetz in the context of a corruption investigation,” said a spokesman for the government of Guinea, Damantang Albert Camara. “We will, however, wait for events to develop to have a clearer view and will give a more detailed statement at the appropriate time.”

The arrest comes amid already-difficult relations between Guinea and BSG, and raises questions over the development of the Simandou deposit in partnership with Brazilian mining group Vale .

Vale declined to comment on the Cilins case.

BSG and the Guinean government have been at loggerheads for months. A government committee wrote in October to BSG and Vale, detailing allegations that BSG had offered and paid bribes in order to secure mining rights in Guinea.

BSG has denied the allegations, describing them as “a crude smear campaign.” The company charges the review process is designed to allow Guinea to renege on its obligations.

Court documents filed by US authorities did not name BSG, but said Cilins was engaged by an unnamed mining “entity” said to have obtained Blocks 1 and 2 of the Simandou deposit in 2008. Cilins is, however, named in the October letter from the Guinean government as a BSG representative in Guinea.

In a 2012 letter replying to the Guinean government’s allegations, BSG said that Cilins helped the firm set up its offices in Guinea in 2006. It said he attended meetings, which he set up, with the minister of mines. BSG said Cilins left Guinea in 2006 and stopped working for the firm.

Steinmetz’ BSG was awarded the northern half of Simandou – Blocks 1 and 2 – in 2008 by the government of long-ruling leader Lansana Conte. Conte died soon after granting the concession.

BSG was not required to pay any cash up front and was given permission to export via Liberia, a shorter route. In return, Steinmetz agreed to build a $1 billion railway from the capital of Conakry on the west coast to Kerouane in the southeast.

Vale bought a 51 percent stake from BSG in a $2.5 billion deal in 2010. However, only $500 million of that has been paid, as Vale says targets have not been met in project development.

Guinea Lacks Running Water and Electricity, Yet Bauxite, Gold, Diamond, and Iron Ore Mines are Booming – Articles

Guinean students forced to study under the lights at Gbessia-Conakry airport because of lack of electricity at home

As the people of Guinea wait for basic services such as water and electricity, Guinean government functionaries suffer perpetual writers’ cramp from signing one lucrative mining contract after another.  Here are a few mining articles from the last couple of days.

From Africa-Asia Confidential, in-depth coverage of Chinese infrastructure projects and iron ore mining.  Also, insight into the murky world of Guinea’s mining ministry:

Conde Wants Quick Results

From Market Watch, we learn that Strategic Mining Corp. has won renewal for its gold concessions in Siguiri. The Siguiri  Basin contains several producing gold mines including operators Anglo-Ashanti, SEMFRO and Lero:

Strategic Mining Corporation Announces Approval of Siguiri Exploration License Renewal by Guinea Government in Gold Rich Birimian Trend

From Proactive Investors USA-Canada, Guinea’s diamond mines keep on giving and giving:

Stellar Diamonds Reports Maiden Resource for Droujba Shares Rise

Australian Mining Report Worried About Guinea’s Political Stability

The ANZ report includes a handy running sheet of our most likely challengers in the race to sate emerging world demand.

In iron ore, we run up against established player Brazil and the known unknown, Guinea.

Brazil has reserves of quality and quantity, a growing share of the global market and is set on making material improvements to its ability to compete through the construction of a new fleet of mega-freighters that will slice 40 per cent from shipping costs.

And Guinea, well, its potential is hard to assess right now. What we know is that it has probably the best quality ore going around and in the sort of volumes that has three majors, Rio Tinto, Vale and BHP Billiton, waiting on political stability to sustain massive investment.

Boom will go pop if we rest on our resources laurels

• Matthew Stevens
• From: The Australian
• September 09, 2011 12:00AM

AUSTRALIA’S place at the vanguard of the beneficiaries of the long boom in global commodities will be challenged over the next half a decade as the mining industry enters phase two of a massive supply-side response to the enriching surge in demand from the emerging economic world.

There would seem to be two central themes to the assessment of Australia’s appropriate responses to the commodities super-cycle prepared for ANZ by Port Jackson Partners and others.

The first is that the demand story underpinning our current national prosperity will sustain and challenge us over decades, not years.

And the second is that our own intellectual indolence, in combination with a spike in the competitiveness of current and emerging suppliers, looms as a key risk to our ability to maximise the astounding potential of this epochal shift in the global economy.

This idea that competition for a representative share of the second phase of the global industry’s supply-side response strikes at the heart of one of the abiding, diverting myths of the modern Australian story — which is that, as a nation, we are fortunate in our over-endowment of high-quality minerals and energy deposits.

The reality is, of course, that we host a relatively modest slice of the global bank of what are our key mineral commodities, and that luck has had very little to do with the effective extraction and monetisation of what we do have.

Our rightful claim on various levels of leadership in the minerals, energy and food game is the product of generations of efficient deployment of human and financial capital that has allowed us to make the most of what we choose to extract or grow.

As golfing great Gary Player famously said in response to those who commented on his routine good fortune: “The harder I practise, the luckier I get.”

The ANZ Insight report makes it all too clear that now is no time for Australia Inc to stop practising.

As this report makes abundantly clear, Australia has nothing like a “monopoly on high-quality mineral and energy resources”, and neither is it unique in owning a competitive position on the cost curve across its suite of hard and soft commodities.

Just on those rural commodities, it was very interesting to hear ANZ chief economist Warren Hogan predict yesterday that China would become a net importer of food within two years. As we have observed often over the past couple of years, the urbanisation of China, India and a host of others through our region is likely to put as much pressure on global food production as it has on the hard commodity sector.

It is hard to predict the consequences of a calorie boom, but one thing that the markets might need to start contemplating is when, rather than if, the New Zealand dollar hit parity with the US dollar. Chinese demand for milk powder and other dairy products has already started to recast NZ’s export economy and, if this report has got it right, that trend to demand growth will compound quickly.

But what of these competitive pressures that the report identifies? I mean who on earth can be as lucky as Australia when it comes to minerals and energy?

Well, there are quite a few actually, and many that will be far more welcoming of China Inc’s approaches to provide oodles of investment in return for greater levels of ownership or influence over output than more mature economies like Australia might be.

The ANZ report includes a handy running sheet of our most likely challengers in the race to sate emerging world demand.

In iron ore, we run up against established player Brazil and the known unknown, Guinea.

Brazil has reserves of quality and quantity, a growing share of the global market and is set on making material improvements to its ability to compete through the construction of a new fleet of mega-freighters that will slice 40 per cent from shipping costs.

And Guinea, well, its potential is hard to assess right now. What we know is that it has probably the best quality ore going around and in the sort of volumes that has three majors, Rio Tinto, Vale and BHP Billiton, waiting on political stability to sustain massive investment.

Then there is our other big earner, coal. In thermal coal we are in a race with fellow low-cost, big reserve producers like Indonesia, Columbia and the increasingly challenged South Africa, while in metcoal we have recently seen Rio spend nearly $4 billion buying big in Mozambique, and the potential of a suite of deposits in Mongolia has the coal world abuzz.

And then there is the real mover on the Australian commodity scene, liquid natural gas. A host of investors, both local and international, are already locked into maybe $US120bn ($113bn) of construction projects as they move to tap gas resources in Western Australia and Queensland. And there is plenty more where that is coming from.

But to secure the newgen spend, Australian projects will be competing with similar developments in the Middle East, with a likely move of US unconventional gas into export markets and with whatever gas China is able to extract from the sort of deep coal fields that are the source of Queensland’s LNG boom.

Australia cannot afford delusions about its attractiveness. Yes, it is a far safer bet right now than, say, Guinea, but sovereign risk might not be the disincentive to resources-strapped China that it is to an options-rich mining major.

It must be observed that it is entirely refreshing to see ANZ investing its executive time and shareholders’ money on this quality of research and analysis.

All sides of politics should recall Australia’s last great reform phase was informed by an enormous amount of broad participatory community discussion about the issues facing Australia.

What Australia needs right now is more than just a rapid improvement in the tone of the dialogue between government and business. We need the government to recognise the standing of a far broader community of inputs in the quest for a more productive national dialogue on reform, just as we need business to refresh its ability to provide solutions-driven research.

As RBA governor Glenn Stevens suggested on Wednesday, we need to acknowledge the problems generated by our buoyant national economic circumstance but not at the cost of failing to identify the opportunity in front of us. Now, we are not being “The babe they called Brian” here. This is not a matter of always looking on the bright side and singing a happy song while we are hanging from a cross. The ANZ assessment is not only that the commodities cycle will buttress our national wealth for at least another generation, but that the benefits of the boom are already being seeded through a far broader sweep on the economy than is conceded by the doomsayers. And the prediction is the rural sector will be the next to feel the heat of Chinese demand as it becomes a net importer of food.

One of the most interesting elements of the report is that it identifies the rise of a cluster of supporting industries that are orbiting around the miners.

So confident is one of the authors of the report, Port Jackson’s Angus Taylor, about the continued growth of these clusters that he was happy to predict that Australia stood a good chance of growing “mining’s Haliburton”.

That potential needs to be driven home to government and to be fully and simply expressed to a community whose appreciation of the prosperity being created by a structural shift in demand for miners, energy and food is being clouded by the growing pains of success.

Rio Tinto Says $10 Billion Guinea Ore Mine Attracts Sovereign Wealth Funds

By Jesse Riseborough – Jun 7, 2011

Rio Tinto Group, the world’s second- biggest mining company, said its Simandou iron-ore mine project in Guinea has attracted interest from sovereign wealth funds.

The development, a venture with Aluminum Corp. of China Ltd., has attracted “strong interest from other sovereign wealth funds and international financiers,” Alan Davies, president of international operations, said in a slide presentation posted on London-based Rio’s website today. The company has spent $1.5 billion at the West African site to-date and production is scheduled to start in 2015, it said.

Simandou has been described by Rio Tinto as one of the world’s biggest undeveloped iron-ore deposits, with a resource of 2.4 billion metric tons of the steelmaking raw material. Baosteel Group Corp., China’s second-largest steelmaker, is “very interested” in participating in Simandou, Chairman Xu Lejiang said in an interview in Shanghai last month.

Prices for iron ore delivered to China, the biggest buyer, have risen almost threefold in the past two years as demand from steelmakers in the country has surged.

“They must find a partner in China,” Xu said last month when asked whether he would be interested in partnering with Chalco, as Aluminum Corp. is known. “Chalco must sell iron ore to China from its investment because it isn’t an iron ore user.”

The Simandou project also includes a 650 kilometer (404 mile) railroad and four-berth wharf. The total development cost will be more than $10 billion, Rio said today.

The site may cost as much as $19 billion to develop, based on similar expansions by BHP Billiton Ltd. in Western Australia, JPMorgan Chase & Co. said in an April report. Chalco agreed to pay $1.35 billion for a 44.65 percent stake.

Settlement Payment

Rio said in April it had agreed to pay Guinea $700 million in a so-called settlement agreement. The accord “gives us the certainty we need to allow us to invest and move forward quickly,” Sam Walsh, chief executive officer of Rio’s iron ore unit, said at the time.

The settlement came after President Alpha Conde ordered the drafting of a policy giving the country at least a one-third stake in mining projects. Guinea has the right to take as much as a 35 percent stake in the mining assets at Simandou and a 51 percent self-funded interest in the infrastructure assets, according to the slide presentation today.

The cash price of 62 percent-iron ore arriving at China’s Tianjin port almost tripled to $170.20 a ton by June 6, from Nov. 21, 2008, when data became available, according to the Steel Index.

Rio is the world’s second-largest mining company by sales, trailing BHP Billiton. Brazil’s Vale SA is the third-largest.

To contact the reporter on this story: Jesse Riseborough in London at jriseborough@bloomberg.net;

To contact the editor responsible for this story: Amanda Jordan at ajordan11@bloomberg.net.

Guinea Threatens New Mining Code, Rio Tinto Comes to the Table, and Both Get a Sweet Deal

Guinea’s announcement of its intent to revise its mining code appears to have motivated Rio Tinto to strike a deal now concerning its long-standing dispute over the Simandou iron ore mine.

 

In a slick quid pro quo, Guinea agreed to give Rio Tinto a pass on current and future mining industry reviews and, in return, Rio Tinto gives the Guinean government a cool $700 million.  The eternal question remains — will the people of Guinea benefit from this government windfall?

Rio Tinto, Guinea strike a deal on iron ore project

THE GAZETTE

April 25, 2011 1:01 PM

MONTREAL – The Rio Tinto Group, which owns almost 60 per cent of Iron Ore Co. of Canada, has settled a two-year-old dispute with the government of Guinea and plans to develop a massive iron ore project in the African country.

Production is to start by mid-2015.

Rio said Monday it will pay the Guinea government $700 million U.S. for an agreement under which its $10 billion Simandou project will not be affected by current or future government mining industry reviews.

“The agreement gives us the certainty we need to move forward with the Simandou project quickly,” Sam Walsh, CEO of Rio’s global iron ore mining business, said in a statement. The Guinea government has the right to take up 35 per cent ownership of Simandou.

Rio runs Simandou through its subsidiary Simfer. It is selling 44.65 per cent of Simfer to Aluminum Corp. of China Ltd., the state-owned Chinese aluminum and metals group.

© Copyright (c) The Montreal Gazette

Rio and Guinea reach final deal on Simandou

(AFP) – 1 day ago

SYDNEY — Global miner Rio Tinto has settled a long-running dispute over Guinea’s huge Simandou iron ore field, with the West African nation agreeing to take a stake of up to 35 percent.

The agreement, which improves Rio’s previous offer of a 20 percent stake for Guinea, ends a protracted impasse over the Simandou project, a joint venture with China’s Chalco expected to produce vast quantities of high-grade ore.

Rio Tinto iron ore chief Sam Walsh said the deal, signed late Friday, cleared the way for the $10 billion venture to go ahead, following about 12 years of fraught negotiations stymied by political upheaval.

The Anglo-Australian miner will pay the government $700 million up front “in recognition of the resolution of all outstanding issues” once its mining concession has been granted.

On ice while talks continued with Guinea, Chalco’s $1.35 billion plan to take a 44.65 percent stake in Rio’s southern Simandou tenement can now go ahead, said Rio, adding that it expected its first shipment by mid-2015.

“(This) agreement gives us the certainty we need to allow us to invest and move forward quickly so we can bring this great resource into production,” Walsh said.

“This is a major project and a significant undertaking and we expect a total investment of more than $10 billion to bring the mine and associated infrastructure onstream.”

Guinea will be offered a 15 percent holding at no cost and has the option to extend its share to 35 percent within 20 years under the deal, which also gives them the right to own 51 percent of the project’s new rail line and port.

The infrastructure would automatically become government property 25-30 years after being built, Rio said.

Royalties of 3.5 percent would be payable for the life of the mine, with an income tax grace period of eight years from first profit, followed by a general rate of 30 percent.

Analysts say the Simandou field, a 2.5-billion-tonne seam of ultra-high grade iron ore stretching for some 110 kilometres (70 miles), could produce up to 200 million tonnes a year and make Guinea one of the world’s top exporters.

That is the equivalent of Rio’s yearly output from Western Australia’s mineral-rich Pilbara but with a higher ore quality for steelmakers in rapidly industrialising China, India and other Asian markets.

Rio originally intended to take control of the entire Simandou concession but Guinea’s government split it into four blocks, only half of which went to Rio.

Switzerland’s BSG Group took the rest and sold on its majority stake to Brazilian resources giant Vale, a major rival to Rio.

— Dow Jones Newswires contributed to this report —

“Mining Turbulence” Raging in Guinea

Bracing for Changes in Mining and Infrastructure Codes in Guinea

April 23, 2011

• Analysis by: GLG Expert Contributor
• Analysis of: Brazil’s Vale says Guinea halts railway upgrade
• Published at: http://www.miningweekly.com

Summary

A “mining turbulence” is raging in Guinea as sweeping changes to mining & infrastructure laws are planned for the first time in 16 years. A 33% “blocking minority” state ownership and cleaning up decades of corruption and bureaucratic nationalism are souring relations between government and miners scrambling to reassure the market their Guinean assets are safe. A new market-friendly regime that helps miners build social licence to operate & protect shareholder value will be mutually beneficial.

Analysis

Guinea is the world’s largest supplier of bauxite (between 25 & 40bn tons, spread across much of the country), the raw material refined into alumina that is then smelted into aluminum metal. Tragically, much of this wealth has been frittered away in corruption and bureaucratic nationalism for decades while mining companies smiled to the bank.

In January, newly elected President Alpha Conde announced plans for a 30% state participation rate. Under current law, the government does not have a right to participate in bauxite and iron ore, let alone share in the profits; instead, it has to pay mining companies to take the ore. It’s only in gold and diamond mining that the government has a right to a 15% share in the assets. The new regime will bring all mineral resources under one participation rate. All current mining contracts would be renegotiated, just as the government will become more rigorous in its application of licensing terms. Significantly, the new mining code will punish companies caught bribing officials and would retroactively punish current license holders if it was established that they were involved in any bribery. Remarkably, George Soros is assisting with these reforms “because Guinea could not afford to pay international consultants.”

The January announcement alarmed the market, hitherto used to back-rubbing between massively corrupt past regimes and mining multinationals, namely Vale SA, Rio Tinto, Global Alumina, Rusal, Chinalco, South Africa’s BSG Resources, and Bellzone Mining. Since then the government has tried to calm nerves by saying that its quest for “blocking minority” stake was not a hard and fast plan.

Last week’, the government canceled the 640 km Kankan-to-Conakry railway project targeting Rio Tinto’s Simandou iron-ore project under construction. Simandou has been dubbed “the largest integrated mine-and-infrastructure project ever developed in Africa” expected to top the $10bn mark. Vale’s Zogota mine at Simandou, scheduled to begin production in 2012 is expected to reach 95mn ton a year within five years. The project is being built in partnership with the Chinese State-owned company Chinalco, the World Bank’s International Finance Corporation (IFC) and Rio Tinto.  Simandou alone will make West Africa one of the world’s foremost iron-ore exporters, comparable with established producers like Brazil and Australia.

Analyses are solely the work of the authors and have not been edited or endorsed by GLG.

Contributed by a Member of the GLG Legal, Economic & Regulatory Affairs Councils