Zimbabwe central banker stockpiles gold to bolster ZiG currency
The ZiG - short for Zimbabwe gold — is the nation’s sixth attempt at having a functioning local currency in the last 15 years.
Guinea is home to some of the richest and easily exploitable iron ore fields outside of Australia’s Pilbara region and top producer Vale’s Brazilian home base.
In May, the Guinea government and Rio Tinto (LON:RIO) and its partners – China’s Chalco together with the World Bank – inked a game-changing $20 billion deal for the southern section of the Simandou iron deposit.
At full production Rio’s Simandou concession would export up to 95 million tonnes per year – that’s a third of Rio’s total capacity at the moment – and would catapult Rio past Vale as world number one.
Rio Tinto held the licence for the entire deposit, but was stripped of the northern blocks in 2008 by a former dictator of the country, one of the poorest in Africa.
BSG Resources, a company associated with Israeli diamond billionaire Beny Steinmetz acquired the concession later that year after spending $160 million exploring the property.
In 2010 BSGR sold 51% to Vale (NYSE:VALE) for $2.5 billion, but the Rio de Janeiro-based company stopped paying after the first $500 million when the investigation was launched.
The Guinea government withdrew the mining permit in April, accusing BSGR of obtaining its rights through corruption. BSGR has denied wrongdoing and filed an arbitration request in an attempt to win compensation from the Western African nation.
Shortly after BSGR’s rights were stripped Rio Tinto filed a lawsuit for billions of dollars against both Vale and BSGR in New York courts for what it called a “steal” of its previously-owned concession. Rio alleges BSGR paid a $200 million bribe to Guinea’s former minister using funds from Vale’s initial payment.
Vale has unsuccessfully tried to have the suit thrown out and now The Australian reports that another high-profile organization has now been dragged into proceedings. Rio alleges that audit and management consulting giant Ernst & Young altered an initial assessment of the corruption risk in Guinea under pressure from Vale:
“Rio’s lawyers said the “purported substance” of EY’s analysis was that no instances of corruption and bribery were found. But the lawyers said EY had committed to showing Vale a preview of its findings ahead of the final report.
“Documents produced by Vale appear to demonstrate that Vale used that review process to pressure Ernst & Young to alter its initial conclusion that BSGR’s business practices posed a high risk of corruption,” the letter said.In asking for EY’s analyses, Rio’s lawyers said “Vale’s enlistment of Ernst & Young could have been another, more elaborate attempt to cover up and sanitise its conspiracy with BSGR.”
For its part BSGR has denied wrongdoing and filed an arbitration request in an attempt to win compensation from the Western African nation for stripping it of its rights. Steinmetz has previously called the Guinean probe’s findings a “smear campaign” against him. A separate Swiss and US probe into the corruption allegations are ongoing.
