Remember the Mining Industry in Guinea? WSJ Updates Us- Never a Dull Moment

Wall Street Journal
By
Scott Patterson
March 19, 2015 5:52 p.m. ET
0 COMMENTS

A long-running corruption investigation involving a mining company controlled by one of Israel’s richest men could yield up to a half-dozen indictments in the U.S., according to people familiar with the matter.

In a briefing last month, U.S. prosecutors told Guinean government officials that senior executives at BSG Resources Ltd. were among some of the people who could be indicted, according to people familiar with the meeting.

BSGR is the mining arm of Israeli billionaire Beny Steinmetz’s family-owned conglomerate. The investigation involves allegations of bribery and obstruction of justice against people connected to BSGR and a deal the company struck in 2008 to win prized mining rights in Guinea’s Simandou mountain range, one of the world’s largest deposits of iron ore.

The company was later stripped of those rights.

In an email Friday, a BSG Resources spokesman said the company would continue to press the Guinean government to “explain the lack of credible evidence used to justify the expropriation of BSGR’s mining rights.”
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“[T]here is no evidence linking BSGR and its employees to corruption in Guinea,” the spokesman said. “Absolutely nothing has changed.”

The timing of the possible indictments is unclear, and investigators could still decide to drop the investigation. Spokesmen for the U.S. Justice Department and the Federal Bureau of Investigation declined to comment.

The February briefing followed the release from U.S. prison of a key individual in the investigation, Frédéric Cilins, in January. Mr. Cilins, a French citizen, had served two years for obstructing the federal investigation into bribery allegations related to BSGR and its mining operations in Guinea.

An attorney for Mr. Cilins, William Schwartz, declined to comment.

The U.S. investigation is one of several probes world-wide involving how the government of the West African nation awarded rights to Simandou. The entire block of iron-ore deposits was once run by Anglo-Australian miner Rio Tinto PLC, but in 2008 Guinea’s government awarded half of those rights to BSGR after the firm carried out a three-year, $165 million exploration program. Later, BSGR struck a $2.5 billion deal for Brazilian mining giant Vale SA, an iron-ore specialist, to buy a 51% stake of its Guinean assets.

Mr. Cilins had worked on behalf of BSGR in Guinea when it was pursuing mining rights there in the mid-2000s. A Guinean government report alleges that Mr. Cilins paid bribes to the wife of the now-deceased Guinean President Lansana Conté to help Mr. Steinmetz’s company win Simandou.

Mr. Cilins hasn’t been charged with bribery or other violations, and has denied the allegation.

The widow of Mr. Conté, Mamadie Touré, is cooperating with U.S. officials, a person familiar with the investigation said. An attorney representing Ms. Touré declined to comment.

In April 2013, Mr. Cilins was arrested in a federal sting operation in a Jacksonville, Fla., airport and charged with obstructing the U.S. investigation. Mr. Cilins pleaded guilty last year in a Manhattan federal court but didn’t agree to cooperate with investigators.

Since then, Guinea, now under a different regime, has stripped BSGR and Vale’s rights to Simandou after a government investigation found BSGR had engaged in corrupt activities. The probe cleared Vale of any wrongdoing. BSGR denies wrongdoing and has filed a formal arbitration request to win compensation from Guinea for stripping it of the iron-ore deposit.

Guinea’s Minister of Mines Kerfalla Yansané told The Wall Street Journal in February that the country plans to put the rights up for auction again in the next few months. However, new iron-ore projects aren’t as enticing as they once were, with the steelmaking ingredient prices hitting a six-year low.

In Switzerland, authorities in late 2013 opened a criminal probe in parallel with an investigation by officials in Guinea into whether BSGR paid bribes to secure the Simandou mining contract. In the U.K., the Serious Fraud Office is seeking information about the deal from two law firms that have acted on behalf of BSGR, including Skadden Arps Slate Meagher & Flom LLP, according to testimony by a BSGR official in a U.K. high-court proceeding. BSGR said in December that it had asked the court to review the lawfulness of the SFO’s alleged actions.

Skadden and the SFO declined to comment.

In a separate proceeding, Rio Tinto is suing BSGR, Vale and Ms. Touré, among others, in Manhattan federal court, alleging that they colluded to rob it of part of its Simandou rights.

Vale, which wrote off the $1.14 billion book value of Simandou in 2014, last Friday said it has transferred its stake to BSGR. Vale, which declined to comment, has denied any plot to rob Rio.

Mahmoud Thiam, a U.S. citizen who took over Guinea’s mining ministry soon after BSGR won the concession, said he recently handed over roughly 10,000 documents related to Simandou to the Guinean government, which is reviewing the documents for potential publication. He had delayed handing over the documents for a time because he was seeking guidance from Guinea’s government about how they handle them, Mr. Thiam said.

Write to Scott Patterson at scott.patterson@wsj.com

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GUINEA: Billionaire Steinmetz Traces Woes to Vale Deal

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)

Rio Backs $21bn Guinea Play Despite Soaring Costs

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. Continue reading “Rio Backs $21bn Guinea Play Despite Soaring Costs”

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

Guinea: US Probe into Steinmetz Mining Corruption Case May Involve Several People, Including Guineans

Late Guinea President Wife Said to Assist Steinmetz Probe

The wife of former Guinea President Lansana Conte is helping the U.S. investigate whether a company controlled by billionaire Beny Steinmetz paid bribes to win an iron-ore deposit, a person with knowledge of the probe said.

Mamadie Toure is assisting the U.S. in its investigation of BSG Resources Ltd., said the person, who asked not to be named as the information is confidential. Guinea has accused BSGR of agreeing to pay Toure, and companies linked to her, $5 million to help it win the permit in 2008, according to an Oct. 30 letter to BSGR’s local joint venture and seen by Bloomberg.

Former Mines Minister Mahmoud Thiam and Ibrahima Kassory Fofana, former finance and economy minister, are people tied to the U.S. probe, according to the person. Both reside in the U.S. Jerika Richardson, a spokeswoman for Manhattan U.S. Attorney Preet Bharara, declined to comment on the investigation.

Steinmetz, 57, is Israel’s richest person with a net worth of about $8.5 billion, according to Bloomberg Billionaires analysis. His BSG Investments has interests in mining, real estate and capital markets, according to its website.

“Allegations of fraud in obtaining our mining rights in Guinea are entirely baseless,” Steinmetz’s company said yesterday by e-mail. “We are confident that BSGR’s position in Guinea will be fully vindicated.”

BSGR denied making payments to Toure in a March 15 letter to the government. A call to Toure’s house in Jacksonville, Florida, failed to reach her.

Kassory Fofana

Kassory Fofana, who said he was minister from 1996 to 1999, denied involvement in any wrongdoing in connection with BSGR, saying “I don’t know anything about any payments of any sort” when reached by telephone in Washington, Thiam’s mobile phone was switched off and wouldn’t take messages.

The allegations of bribery follow the arrest of a man alleged by Guinea to have links to BSGR who was charged with plotting to destroy documents and induce a witness to give false testimony to a grand jury investigating potential violations of the Foreign Corrupt Practices Act, according to a criminal complaint filed this week in federal court in New York.

Between March and April 14, Frederic Cilins allegedly offered to pay the witness, described as the former wife of a now-deceased high-ranking Guinea government official, to deliver documents subpoenaed by the jury and documents requested by the FBI so he could destroy them, according to the complaint.

Toure, Conte

She’s cooperating in the hope of obtaining immunity for her own potential criminal conduct, the complaint states. Toure was the fourth wife of former President Conte, who died in 2008.

BSGR acquired rights to part of the Simandou project, one of the world’s richest iron-ore deposits, after Rio Tinto Group was ordered by the government to give up a section of its license area. BSGR subsequently sold 51 percent of its Simandou stake to Brazil’s Vale SA (VALE5) in 2010 for $2.5 billion.

Guinea last year started its own probe into how Guernsey- based BSGR gained control of the license. The company may have bribed Toure to obtain exploration permits, including for Blocks 1 and 2 at Simandou, Guinea officials alleged in the Oct. 30 letter.

The Guinea government alleged that it had obtained information that BSGR paid Toure $2.5 million and agreed on a contract with her to pay a further $2.5 million for her help in securing the agreements, according to the letter.

“The U.S. indictments may give the Guinean government valuable leverage in its own investigation into the 2008 deal, which could potentially allow it to earn billions of dollars by recovering the rights and improve its battered reputation,” Martin Roberts, an analyst at IHS Global Insight Ltd., said in an April 17 report.

Strip Rights

BSGR said last month that Guinea was preparing to strip its joint venture with Vale of its mining rights in the country. The venture’s Simandou development includes a planned $10 billion iron-ore mine.

Vale, the world’s third-biggest mining company, is “deeply concerned” about the allegations and intends to cooperate fully with the governments of the U.S. and Guinea, it said in an April 16 statement.

Cilins, 50, was arrested in Jacksonville on April 14 and faces charges of tampering with a witness, obstructing an investigation and destroying or falsifying records in a federal probe. The obstruction charge carries a maximum penalty of five years in prison, and the record-destruction charges carry a maximum sentence of 20 years.

Frederic Cilins

Guinean Justice Minister Christian Sow said in an April 16 statement issued by the office of President Alpha Conde that Cilins was an agent of BSGR. The company said in an e-mailed statement that Cilins isn’t one of its 6,000 employees.

The federal grand-jury investigation concerns transfers of money into the U.S. from outside the country as part of a scheme to obtain mining concessions in Guinea including in the Simandou region, according to the complaint.

After a military junta took control of Guinea following Conte’s death, BSGR regularly made payments to senior members of the military through Thiam, the mines minister at the time, according to the Oct. 30 letter.

Steinmetz, a Swiss resident with dual French and Israeli nationality, started his career in the family diamond business, Steinmetz Diamonds, which provides rough and polished stones from facilities in Botswana, South Africa, Namibia and New York.

The case is U.S. v. Cilins, 13-mj-00975, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporters on this story: Jesse Riseborough in London at jriseborough@bloomberg.net; Franz Wild in Johannesburg at fwild@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net

Guinea’s Newly Amended Mining Code Gives Incentives for Miners to Do More Than Dig

Mines Minister Fofana states that corruption by mining companies will not be tolerated by the Guinean government. Guinean citizens would probably be glad to hear that the government is equally vigilant about preventing corruption within its own ranks.

Guinea says new code encourages miners to do more than dig

By: Reuters

10th April 2013

LONDON – Guinea’s amended mining code, brought in this week to improve a bruised investment record, will use the government’s entitlement to a stake in mining projects to encourage companies to process minerals locally, its mines minister said on Wednesday.

Guinea approved changes to its mining code earlier this week bringing in provisions including some tax cuts, as it tries to woo investors in a sector that has become increasingly wary of projects in so-called frontier regions like West Africa.

The code retains a controversial clause giving the state a free 15% stake in mining projects, but Minister Mohamed Lamine Fofana said the aim of the measure was to boost the amount of processing, refining and smelting done in Guinea and to cut back the amount of raw material simply shipped out.

“We do not want our country to continue to be just the place minerals are removed from – we want to encourage the transformation of minerals for the creation of added value,” Fofana told Reuters by telephone.

“So if the operation is just above removing ore, the government demands 15%. If, for example, bauxite is turned into alumina, the holding drops to 7.5 percent. We want to encourage integrated production.”

If companies go all the way up the chain and produce aluminium, the state’s free stake could be as little as 2%, Fofana said, adding a similar scale applied to iron ore, a steelmaking ingredient Guinea’s south is rich in.

“The idea is to penalise those who remove the raw product and simply export it.”

Many resource-rich nations in Africa and elsewhere are attempting to push what is known as “beneficiation” – avoiding the export of minerals as ores or semi-processed materials, instead of as higher value intermediate or finished products.

Countries like South Africa have actively promoted the push in order to improve local employment and drive economic growth.

Guinea, however, is facing the challenge of encouraging ever higher investment and overhauling its regulation during a prolonged and difficult transition after a military coup in 2008. The push also coincides with weaker commodity prices and pressure on companies like Rio Tinto and BHP Billiton to trim back spending.

The two majors have, respectively, slowed investment in Guinea and virtually pulled out.

Fofana said the code, promised by President Alpha Conde more than two years ago, would also help the country’s push to clean up a sector plagued by corruption and mismanagement.

“We have extremely tough position on corruption. The promotion of transparency is our priority,” he said.

“If a company is caught on corruption charges, it will lose its licence or at least pay a fine that will discourage it from repeating the move.”

Guinea is currently reviewing mining contracts, particularly those signed during the 2009/10 period when the country was ruled by a military junta.

Contracts currently under review include BSG Resources’ deal to obtain half of the giant Simandou iron ore concession.

Edited by: Reuters

Vale Woos Guinea with Social Projects

July 6, 2011 7:38 pm

Vale woos Guinea with social projects

By Jack Farchy and William MacNamara in London and Samantha Pearson in São Paulo

Vale’s finance chief said the Brazilian miner would invest in development programmes in Guinea in an attempt to safeguard a $2.5bn mining concession and avoid making a large pay-out to the African country’s new government.

In spite of still being vulnerable to a review of mining licenses in Guinea, Guilherme Cavalcanti said that Vale could win the government’s approval for its Simandou iron ore project that it shares with rival Rio Tinto by paying for education and agriculture in the communities where it mines.

“Our approach to Africa in Guinea is not to become only a mining extraction [company] but bring country co-operation,” he said. “So, as we do in Mozambique, we can help people in agriculture, we can help in education, we can train local people … So it’s more an approach to communities as well, not only mining extraction.”

Rio Tinto only gained clear tenure in Guinea in April after promising the government $700m in cash as well as rights to take up to a 35 per cent stake in Simandou.

Simandou, one of the highest-quality untapped iron ore resources in the world, has attracted the two largest iron ore miners to Guinea despite the country’s history of volatile dictatorship, weak rule of law, and recurring threats of licence renegotiations.

Rio controls the southern half and Vale the northern half.

In addition to giving cash and equity to the government, Rio agreed to build a railway from one side of the country to the other. It granted rights for the government to take a 51 per cent stake in the railway.

However, Mr Cavalcanti did not mention national infrastructure funding or cash payments.

Since Alpha Conde was elected Guinea’s president last November, the new government has sought to overhaul mining contracts to return more benefits to the desperately poor population.

The government is seeking to take a minimum 33 per cent stake in all mining projects, a percentage that Vale has not granted.

The stakes should be “enough to block any decisions and take part in the big decisions the mining sector makes”, according to Mohamed Fofana, minister of mines.

The economics of Vale’s Simandou investment could be threatened by a cash-and-equity deal similar to Rio. Unlike Rio, Vale controls only 51 per cent of its concession. The remainder is held by Beny Steinmetz Group Resources.

Brazil’s status as a fellow emerging market power and former colony might help Vale cut a better deal with the Guinean government than Rio Tinto, analysts said. “Vale is at an advantage in this respect but nevertheless, it will probably still have to pay something,” said Pedro Galdi, an analyst at SLW Corretora in São Paulo.