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)

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

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

simandoumineSIMANDOU 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 Hires Law Firm, Currently Being Sued for Padding Its Bills, to Conduct Review of Mining Contracts

Guinea has contracted with a “global” law firm by the name of DLA Piper to review mining contracts. Its website says it has 4,200 lawyers and it does business in over 30 countries. DLA Piper is being sued by a client for padding its bills.

Tony Blair must be the “agent” who connected DLA Piper with Conde, especially since, before the contract with Guinea, the firm did not have any business dealings in Africa.

Two articles follow:

Government of Guinea picks DLA Piper to review mining contracts

by City A.M. Reporter

March 28, 2013, 2:57am

GUINEA has chosen global law firm DLA Piper and three other advisers to help review and, if need be, renegotiate mining contracts signed by previous governments, the head of the review body told Reuters.

The review, pledged by President Alpha Conde after he came to power in 2010, will scrutinise contracts with companies such as BHP Billiton, Vale, Rio Tinto, Rusal and BSGR to ensure the mineral-rich but impoverished West African state is benefiting sufficiently from deals. Guinean officials have criticised a lack of openness when the contracts were signed, particularly those agreed during the two years of military rule before Conde’s 2010 election

“Our objective is to point out to our partners areas in their contracts where the country is at a flagrant disadvantage, and discuss openly with them,” Nava Toure said.

Guinea is the world’s top supplier of the aluminum ore bauxite and is also home to the Simandou iron ore deposit held by Rio Tinto and BSGR.

3/27/2013 @ 11:25AM |6,381 views

Apology Fail in DLA Piper Legal Billing Scandal

Victoria Pynchon Victoria Pynchon, Contributor

There are some good lawyers

The billable hour is the monster inside the law business. Thanks to dogged discovery efforts by a former DLA Piper client, the monster has broken out of its lair and is standing, somewhat mortified but proud and unbowed, in the media’s cross-hairs.

If you’ve been on vacation, here are billing emails discovered in a lawsuit between (depending on your side of the case) a deadbeat client and an upstanding law firm or a virtuous businessman and his rapacious lawyers.

“I hear we are already 200k over our estimate — that’s Team DLA Piper!” wrote Erich P. Eisenegger, a lawyer at the firm. Another DLA Piper lawyer, Christopher Thomson, replied, noting that a third colleague, Vincent J. Roldan, had been enlisted to work on the matter. “Now Vince has random people working full time on random research projects in standard ‘churn that bill, baby!’ mode,” Mr. Thomson wrote. “That bill shall know no limits.”

I don’t know who Piper’s crisis PR team is but I’d hire a new advisor. When you’ve been caught with your pants down in a public space, you do not rush to blame the alleged victim, you do not say the written evidence doesn’t reflect the facts on the ground, you do not demonize the “former attorneys” who created the evidence, and, you do not assert your firm’s integrity (having recently housed the miscreants whose behavior belies that claim).

Continue to read article in full.

Mining and Agriculture: Guinea Plans to Launch Stock Exchange within Two Years

GUINMINING

Guinea plans to launch stock exchange within two years

By: Reuters

19th March 2013

Updated 20 minutes ago

ABIDJAN – Resource-rich Guinea plans to launch a stock exchange within the next two years to raise financing for its struggling mining sector, a senior central bank official said on Monday.

The West African nation is already the world’s leading exporter of the aluminium ore bauxite and is seeking to develop other mining potential including the Simandou mine, one of the world’s largest untapped iron ore deposits.

“Guinea is an important mining and agricultural country … There is a financing problem. Traditional financing through the banks is no longer effective,” said Mamady Fofana, director of lending for the central bank.

“So we must find other methods both to finance these companies and for the country’s growth,” he told Reuters on the sidelines of a conference in Ivory Coast’s commercial capital, Abidjan.

Fofana said that Guinea’s government was in the process of creating a shortlist of companies to be traded on the new exchange. “We’ll start with a maximum of 10 companies, mainly from the mining sector as well as a few industrial firms and banks,” he said.

He declined to name any potential candidates.

Guinea has been plagued by political instability and corrupt leadership for much of its history since gaining independence from France in 1958. Despite its abundant mineral wealth, it remains one of the world’s poorest nations.

Economic growth has been held back by uncertainty surrounding the delay of parliamentary elections, the government said. Its economy grew by 3.9 percent last year, roughly one percentage point less than forecast.

Miners BHP Billiton, Vale and Russia’s RUSAL have begun backing away from planned investments, partly because of a government review of mining contracts.

Guinea’s government last week dismissed concerns raised over the future of Rio Tinto’s Simandou mine after the company’s CEO asked for confirmation of the state’s financial contribution to the project’s infrastructure.

Edited by: Reuters

David Gleason Article, “South Africans Litter the Pages of Guinea Report”

As set out previously in this column, there is a broad allegation that somehow a South African organisation called Waymark Infotech played a major role in the “theft” of the presidential election held in 2010.

The first round was convincingly won by Dalein Diallo, who collected 43.7% of the vote. His principal opponent, Alpha Condé, won 18.3%. The elections were being managed by a French company, Sagem, funded by the European Union, but in May 2010 the Guinean Central Election Committee appointed Waymark as the technical provider of the electoral registry.

Out went Sagem, and that meant a four-month delay between the first and second round. Condé won the latter with an astonishing 52.5% of the vote. Dalein Diallo won 47.5%. Condé was sworn in as president on December 21 2010.

South Africans litter the pages of Guinea report

by David Gleason, 14 March 2013, 05:37

FROM time to time over the last few months I’ve had cause to write about the goings-on in Guinea, an unhappy country sandwiched between other West African states, all of which have doubtful track records. The big difference is that Guinea is hugely mineral wealthy.

That wealth is the only possible reason for South Africa’s keen interest in it. As set out previously in this column, there is a broad allegation that somehow a South African organisation called Waymark Infotech played a major role in the “theft” of the presidential election held in 2010.

The first round was convincingly won by Dalein Diallo, who collected 43.7% of the vote. His principal opponent, Alpha Condé, won 18.3%. The elections were being managed by a French company, Sagem, funded by the European Union, but in May 2010 the Guinean Central Election Committee appointed Waymark as the technical provider of the electoral registry.

Out went Sagem, and that meant a four-month delay between the first and second round. Condé won the latter with an astonishing 52.5% of the vote. Dalein Diallo won 47.5%. Condé was sworn in as president on December 21 2010.

A wandering albatross has now deposited a monster report on my balcony, 86 pages of what it calls sensitive commercial information. South Africa and South Africans litter the pages: Tokyo Sexwale, Walter Hennig, Mark Willcox, two meetings in South Africa, one with President Jacob Zuma in April 2010, a Hein van Niekerk, said to be an intelligence officer, even old Pik Botha, and a plan to “pay back his (Condé’s) South African benefactors”. That’s when the Florus Bell/Palladino saga first hit the world headlines, a deal that needed to be hastily unscrambled when the details were unveiled.

The essence of the report is that the mining companies involved in Guinea are either going to be squeezed mercilessly or processes will be embarked upon which will see the ownership of mineral rights changing hands. It is certainly the case — so far, at least — that Rio Tinto was obliged to pay $700m to the Guinean government to ensure that its mineral rights would be left unchallenged.

Coincidentally, that $700m was about half the sum the Aluminium Corporation of China (Chinalco) paid to Rio for a stake in a portion of the fabulous Simandou high-grade iron-ore deposit.

I understand that the giant Russian aluminium producer Rusal, which operates the huge Dian Dian bauxite and alumina project, is under pressure to pay the Guinean government about $1bn, a sum calculated by Alex Stewart International as compensation for loss of earnings linked to the privatisation of the Friguia bauxite and alumina complex in 2006. Russian Foreign Minister Sergey Lavrov visited Guinea last month to resolve the impasse but came away, I am told, empty-handed.

Somewhere in the mix is Roger Agnelli, Brazilian mining house Vale’s former CEO. I gather he’s trying to winkle access to the remaining mineral rights over the Simandou deposit, although he has his former firm to contend with first — it holds a 60% interest.

Never far from any of this is Guinea’s neighbour, Mali. It is in the throes of putting down a revolt with strong religious ties and connections with some off-shoots of the al-Qaeda organisation. Guinea itself is reckoned to be 85% Muslim, so it must be assumed it will harbour some sympathy for Mali’s rebels.

It is a heady brew, destined for a showdown because a Guinean court has summoned opposition leaders to appear at a hearing today after nearly two weeks of protests in which eight people have died.

This comes just ahead of long-delayed elections for Guinea’s national assembly. The opposition has demanded that Waymark be replaced because some voter lists favour regions that support President Condé. Opposition leaders say they will be at court “accompanied by all our supporters”.