Brazilian major mining group Vale has highlighted that the Technical Committee for the Revision of Mining Rights and Agreements of the Republic of Guinea has not found any involvement by the company in illegal activities in the acquisition of mining rights in the West African country. This followed the technical committee’s finding that BSG Resources (BSGR) had corruptly acquired mineral rights in Guinea.

“Vale vehemently condemns the use of corrupt practices, reiterates its commitment to transparent corporate governance and is considering its legal rights and options,” stated the group in a press release. Reportedly, BSGR bribed members of the family (including even the wife) of the then President of Guinea, Lansana Conté to, in 2008, obtain the mining concessions for the northern portion (two blocks) of the huge Simandou iron-ore resource, previously held entirely by Rio Tinto. (Conté died in office in December 2008.)

Vale bought 51% of BSGR in April 2010, creating Vale BSGR (Guinea) Limited (VBG). “Vale acquired its shareholding in VBG only after extensive due diligence, undertaken by specialised professionals and based on declarations and guarantees that BSGR had acquired all the mineral rights legally and without any inappropriate or corrupt commitments or payments,” affirmed the group.

The technical committee made its findings after a three year investigation into the granting of the northern Simandou blocks to BSGR. In its report, the committee recommended that the Guinean government revoke the mining rights granted to BSGR and Vale and that BSGR, affiliates of BSGR and VBR be banned from participating in any future minerals rights concessioning processes in the country. The committee, Vale stressed, did not recommend any ban on the Brazilian miner itself. The current President, Alpha Condé, has accepted the committee’s recommendations.

Vale has admitted that it could lose its entire investment in Simandou. The Brazilian miner agreed to pay BSGR $2.5-billion for its 51% stake. However, not all of this has been paid yet. The book value of its actual investment in VBG during 2010 was $1.1-billion, according to a filing with the US Securities and Exchange Commission that year. However, Brazilian media report that only $500-million has been paid to BSGR so far. Thus, there is uncertainty about how much Vale is set to lose in Guinea.

The whole Simandou deposit could contain 2.25-billion tons of high-quality iron-ore. At current prices, that could be worth $243-billion. However, there is no infrastructure to extract or transport the iron-ore to the coast or load it on ships. Construction of all the necessary infrastructure could cost $10-billion.

BSGR has strongly denied the findings of the technical committee. “BSGR will prove these allegations false,” a company spokesperson told the Wall Street Journal. “The Guinean government is relying on fabricated claims, compromised witnesses and illegitimate processes. The next step is international arbitration where the evidence can be aired in a proper forum and BSGR can establish the truth.”