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GUINEA: Billionaire Steinmetz Traces Woes to Vale Deal

June 27, 2013
LONDON, June 27 | Thu Jun 27, 2013 5:00pm EDT

(Reuters) – Billionaire Beny Steinmetz, who is embroiled in a bitter mining battle with Guinea, has told an Israeli newspaper that he traces his troubles back to a deal three years ago that brought in Brazilian miner Vale SA as a partner.

Steinmetz – a media-shy Israeli-born tycoon – has remained silent throughout the months-long fight between BSG Resources, the mining arm of his business empire, and the West African country, over BSGR’s right to mine half of Simandou, one of the world’s largest untapped iron ore deposits.

But in an interview with Israeli newspaper Yedioth Ahronoth to be published on Friday – his first since the Guinean dispute began last year – Steinmetz said it was the group’s lucrative 2010 deal with Vale that marked the start of trouble.

BSGR was handed the concession for northern Simandou in 2008, shortly before the death of then-president Lansana Conte. No payment was made up-front, though BSGR agreed to build a $1 billion passenger and freight railway from the capital Conakry on the west coast to Kerouane in the southeast.

Less than two years later, BSGR struck a deal with Vale, the world’s largest iron ore producer, to sell a 51 percent stake in the project for $2.5 billion.

“The problem began, apparently, from envy following the Vale sale. People began to say that BSGR bought an asset for $100 or $200 million and sold it for $5 billion,” Steinmetz told the newspaper, apparently referring to a $165 million BSGR exploration programme agreed with Guinea.

“This is not true – it sold 10 percent for $500 million, with an option to go up to 51 percent in exchange for another $2 billion.”

Vale has said it paid $500 million but hurdles were not met for any further payments to be made.

NO SKELETONS

The Guinean government, carrying out a major review of mining contracts, last year accused BSGR of paying bribes to obtain its concession days before the death of Conte in 2008. The uncertainty around the project meant it was put on ice.

BSGR has repeatedly denied wrongdoing and Steinmetz dismissed the accusations as “preposterous rumours.”

“There are no skeletons in the closet. The company pays nothing to anyone,” he told the newspaper. Instead, the billionaire – who is not involved in the day-to-day running of BSGR but remains closely associated – accused a “wicked and well-oiled machine” of operating against the group.

BSGR has frequently accused the Guinean government’s high-profile foreign advisers of conducting a damaging and personal smear campaign to thwart its ambitions in Guinea. It has also blamed President Alpha Conde, who came to power in 2010 vowing to clean up a mining sector which has failed to enrich Guinea.

Sources familiar with the matter have said the review of BSGR’s Simandou concession could take months more, not least because of an FBI investigation into allegations of corruption. FBI agents in April arrested BSGR representative Frederic Cilins in Florida, on charges of obstructing a criminal investigation, tampering with a witness and destroying records.

“I met him three or four times in the past, after the deal with Vale was sealed,” Steinmetz said, denying ties to Cilins.

(Reporting by Dan Williams in Jerusalem and Clara Ferreira-Marques in London; editing by Matthew Lewis)

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