Home > ​Rio Tinto sues Vale over Simandou iron ore mine

​Rio Tinto sues Vale over Simandou iron ore mine

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Rio Tinto has filed a legal complaint in the US against Vale and other groups over the loss of its Simandou mining concessions.

In addition to Vale, Rio is also suing Israeli mining billionaire Beny Steinmetz and his company BSG Resources, Frederic Cilins, Michael Noy, Avraham Lev Ran, Mamadie Tourie, and Mahmoud Thiam.

Rio Tinto claims that the defendants stole the mining rights for Simandou blocks 1 and 2 in 2008 and later entered an agreement with Vale who had already obtained propriety knowledge, after Rio spent more than a decade and hundreds of millions of dollars in developing the site.

In its filed complaint, Rio stated that negotiations between it and Vale started in 2008, and Rio provided the information regarding Simandou. It stated that “as Vale quickly surmised, gaining control of the Simandou deposit would strengthen Vale's position in the world's high-grade iron ore market, since the only other comparable source is Vale's own Carajas Iron Ore Mine in Brazil”.

“Defendant Vale saw a golden opportunity to not only obtain that control, but to do so on the cheap, when Vale learned from Rio Tinto that Defendants Steinmetz and BSG Resources Limited (collectively with its named subsidiaries and affiliates, "BSGR") were attempting to interfere with and steal Rio Tinto's rights to the Simandou concession. Given BSGR's reputation for corruption and bribery—well known among those active in the mining industry, including Vale—Vale was on notice that Steinmetz's and BSGR's efforts to misappropriate Rio Tinto's rights included bribing various Guinean officials,” Rio said.

The miner went on to state that Vale and Steinmetz “entered into a conspiracy to misappropriate Rio Tinto’s Simandou rights” and used a campaign of bribery to do so.

It stated that Vale and Steinmetz’s BSGR then paid a $200 million bribe to the Guinean minister of mines, Mahmoud Thiam, for his assistance in “unlawfully securing Rio Tinto’s Simandou rights”.

Following the revelation of this information, the Guinean Government revoked all of BSGR and Vale’s mining licences for both the Simandou and Zogota concessions in the country.

“The Government’s decision is based on fraudulent conduct in connection with the acquisition of the mining licenses and refers to a report by the Technical Committee for the Review of Mining Titles and Agreements (the "Technical Committee") concluding that the mining concessions had been tainted by corrupt practices on the part of BSGR,” Vale said in a company statement.

Vale went on to say that “the Technical Committee did not find any involvement by Vale in the fraudulent conduct relating to the acquisition of the mining licenses, which occurred more than one year before Vale made any investment in VBG, and recommended that the Guinean Government adopt measures to exclude VBG and BSGR, and BSGR’s affiliates, from the reallocation of the mining titles, but did not suggest that Vale be prohibited from participating in any such process. “

In Rio Tinto’s official complaint, it claims the BSGR worked to obtain the rights to Simandou’s block 1 and 2 through illegal dealing with Guinean president Conte, by establishing a working corrupt relationship with defendant Mamadie Toure and her family, as well as Conte, using high levels of bribery.

In 2008 the Guinean government sent a letter to Rio Tinto indicating that it had rescinded its rights to block 1 and 2, and passing the rights to BSGR.

This turn of events was surprising, to say the least, to everyone except the co-conspirators. Not only is it highly irregular in the mining industry to award a mining concession to lands with proven reserves to an entity that took no part in the exploration of those reserves, but the last communication Rio Tinto received regarding its Concession was a September 19, 2008 letter reassuring Rio Tinto of the Guinean Government's "firm wish to carry out the partnership with" Rio 22 Tinto. Also, the awarding of Blocks 1 and 2 to BSGR Guinea was of particular concern since Blocks 1 and 2 contained the valuable Captain Hook area of Rio Tinto's Concession,” Rio Tinto said.

In 2011 Rio Tinto had to pay $700 million to keep the project, and also give the Guinean government a 15% claim on the project at no expense “after the Minister-Secretary General of the Guinean Government informed Rio Tinto that the Government ‘might’ demand the retrocession of Block 3” as well.

According to Bloomberg Thiam dismissed Rio Tinto’s claims as incorrect and “borderline comical”.

BSGR has also reportedly declined to comment on the matter.

The case currently sites before the court.

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