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The Simandou mountains in Guinea holds some of the richest iron ore deposits in the world and has the potential to transform the fortunes of the impoverished West African nation.
World number two miner Rio Tinto is developing the southern part of the vast mountain deposit with first production from the massive $20 billion project not expected until late 2018 at the earliest.
The northern part of the Simandou concession is held by BSG Resources, a company in the stable of billionaire diamond magnate Beny Steinmetz, and Brazilian giant Vale (NYSE:VALE).
All work on the section awarded to BSGR by a former Guinea dictator in 2008 and 50%-sold to Vale in 2010 has been halted as the government of Guinea revisits all mining contracts entered into under previous regimes.
This week the Guinean committee reviewing the Simandou licences recommended the government strip BSGR as well as Vale of their rights because the panel alleges BSGR obtained the concession through corruption, reports Reuters.
BSGR has all along denied the claims maintaining that “the review has been conducted throughout without any respect for basic due process and procedural fairness.”
BSGR was awarded the rights days before the death of Guinea dictator Lansana Conté in 2008 after spending more than $160 million exploring the prospect.
Conté had not long before stripped the Simandou blocks from Rio Tinto which had held the exploration rights since the late 1990, ostensibly over the Anglo-Australian company’s failure to develop the deposits.
The Brazilian company acquired the interest for $2.5 billion in 2010, but stopped payments to BSGR after the first $500 million was forked over because certain progress milestones were not met.
Vale was not accused of any wrongdoing and may still be in the running to exploit the vast deposit.
The awarding of the rights are also the subject of a separate Swiss, UK and US anti-corruption and fraud investigations.
