Press Release / Nov. 9, 2012

Beny Steinmetz Group Resources must publicly address questions over Guinea mining concession

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The Financial Times has published serious corruption allegations relating to the confiscation of half of one of the world’s biggest iron ore concessions and its granting to a company linked to a billionaire mining entrepreneur.[1] The deal appears to have netted the entrepreneur’s company, Beny Steinmetz Group Resources (BSGR), a profit of hundreds of millions, potentially billions, of dollars within the space of a few months, after it sold just over half of the asset on.

The allegations referred to by the Financial Times had been put to BSGR and its joint venture partner, Brazilian mining giant Vale, by a mining review committee set up by the West African nation of Guinea.[2] The committee has given them 60 days to respond to the allegations before a formal hearing takes place on whether to rescind the joint venture’s mining licences. BSGR has denied any wrongdoing and The Sunday Times has reported that Beny Steinmetz plans to boycott the committee.[3] Vale has not commented publicly on the allegations but was cited by the Financial Times as saying that it “conducts appropriate due diligence prior to its investments”.

In a statement issued on 7 November 2012, BSGR said that it “contests the legitimacy of the whole process and will use all available means to protect the rights it legally acquired in Guinea.”[4]

Given the extreme levels of poverty in Guinea and the international importance of the mining area in question – the iron-rich Simandou mountain range – Global Witness believes full light should be shone on the matter, and is urging BSGR to fully address the allegations. The company should publicly provide details about the negotiations surrounding blocks 1 and 2 of the massive Simandou iron ore concession. Full details should also be provided about the terms of the deals BSGR struck with successive Guinean governments and Vale, which is the world’s no. 1 iron-ore producer. Vale, equally, should publicly answer all relevant questions and explain what due diligence it did over its Guinea venture.

The Anglo-Australian miner Rio Tinto had originally acquired exploration rights to blocks 1, 2, 3 and 4 of Simandou in 1997. It agreed to start up commercial mining there in 2003[5] and in 2006 the World Bank’s International Finance Corporation became a 5 per cent shareholder.[6] It was a much-coveted asset, with Rio Tinto CEO Tom Albanese telling journalists in 2008 that “Simandou is, without doubt, the top undeveloped tier-one iron ore asset in the world”.[7]

The Guinean government, then under the control of long-standing president Lansana Conté, confiscated the northern half of the mine (blocks 1 and 2) in July 2008. In December that year, less than two weeks before Conté died, BSGR was awarded exploration rights for the blocks, reportedly for free.[8] BSGR is a Guernsey-registered company that is managed on behalf of the family of Beny Steinmetz,[9] who has been listed by Bloomberg as Israel’s richest man.[10]

A brutal military junta that took over from Conté reaffirmed BSGR’s rights to the blocks.[11] Then, in April 2010, BSGR sold on 51 per cent of blocks 1 and 2 for $2.5 billion – more than twice the size of Guinea’s budget for 2010, which amounted to roughly $1.2 billion.[12] Of this total, $500 million was paid to BSGR up-front, with the remainder to be paid in future instalments.[13] Since the end of 2010, Guinea has been led by democratically elected president Alpha Condé, who established the current mining review.

Details of the December 2008 agreement between BSGR and the Guinean government are not publicly known. If it is true that BSGR paid nothing for the mine, then the $500 million received and the prospect of a further $2 billion represented immense profits for BSGR -- even if one takes into account a reported $160 million investment by BSGR into Simandou blocks 1 and 2 and an additional Guinean mine called Zogota.[14] If Guinea had received Vale’s payment directly, without passing by BSGR, the country’s economy would have benefitted immensely.

Among the various questions it has raised, the mining committee has asked whether BSGR was engaging in what is referred to as a “flipping” operation – acquiring mining rights with the sole intention of selling them on. BSGR told the Financial Times: “This is not about a short-term flip; it is about a long-term commitment.”

A Guinean government spokesman has confirmed to the news agency Reuters that it was reviewing BSGR’s contract as part of a broader review of resource agreements.

“BSGR maintains that it is innocent of any wrongdoing,” the company told the Financial Times, adding: “This is the latest in an orchestrated campaign being conducted to undermine BSGR’s position in Guinea in order to enable our assets to be seized and sold to a variety of interested third parties.”

Global Witness has received a letter from BSGR’s Chairman, David Clark, saying that “any allegations of impropriety are without foundation” and that “unjustified attacks are putting at risk a joint venture worth many billions of dollars and creating irreparable damage to Guinea and its people”.

The letter warned that BSGR would “respond with all available legal means to prevent damaging and defamatory attacks on our company”. Global Witness has replied to the letter, requesting that the company provide full details of how it gained access to Blocks 1 and 2 of Simandou.

The Financial Times has said that among the allegations regarding BSGR is that a representative of the company “offered then-president Conté a gold watch adorned with diamonds and that the company agreed to pay the president’s fourth wife a commission of $2.5m for helping the group secure mining rights in Guinea”. BSGR denied any knowledge of such a gift to the former president and that it had paid money to his wife.

An article by Reuters expanded on the allegations put to BSGR, including that cash was flown into Guinea on BSGR’s private jet as part of a strategy “to improve its relations with decision-makers by making regular payments to high military figures”.[15]

Reuters quoted from the document sent to BSGR, saying it alleged that the mines minister of Guinea from 2009 to 2010, Mahmoud Thiam, “repeatedly served as a BSGR conduit for the purposes of these payments, receiving the money on arrival at the Conakry airport and organising their distribution among the people to whom they were destined”. Mr Thiam denied the accusations. He has told Reuters that “every deal we made was carefully crafted towards following the letter of the mining code”.

Global Witness believes that the Guinean government should seek redress for any large-scale corruption that has taken place in relation to the blocks covering Simandou or any other assets. In future, all of the state's mining assets should be granted only through open, competitive tenders to ensure the state benefits as much as possible from its resources. Such a move would also help avoid further controversies. Global Witness intends to publish a follow-up statement regarding BSGR’s Guinean licences once it has had time to discuss further with BSGR and other relevant companies and officials.

/ Ends

Contact: Daniel Balint-Kurti: tel. 0207 492 5872/07912 517 146; e-mail: [email protected]

Notes to editors:

BSGR has reacted to the press articles cited in this statement with a statement of its own, which can be found at

[1] A series of articles was published by the Financial Times on 2 November and 7 November 2012. The main article laying out the allegations is: “Guinea reignites $2.5bn mining tussle”, 2 November 2012, by Tom Burgis, Helen Thomas and Misha Glenny;, last accessed 8 November 2012.

[2] BSGR has, according to Reuters, acknowledged receiving the letter. See: “Mining firm accused of lavishing gifts in Guinea”, 5 November 2012;, last accessed 7 November 2012.

[3] The Sunday Times, “Soros stirs Guinea row”, by Danny Fortson; 4 November 2012. For the full statement from BSG Resources Ltd of 7 November 2012, see: “Statement Regarding Simandou Project, Guinea - BSGR to resist smear campaign to undermine position in Guinea”,

[4] See BSGR statement, referenced above.

[5] Rio Tinto statement, “Simandou mining concession granted to Rio Tinto”, 10 April 2006;, last accessed 5 November 2012.

[6] See IFC statement of 24 September 2007: “IFC Increases Investment in Guinean Iron Ore Project to Support Sustainable Mine Development and Local Economic Benefits”;, last accessed 6 November 2012. The statement says: “IFC has approved an additional $30 million investment in Simfer S.A., Rio Tinto’s Guinean project company, to maintain the 5 percent shareholding it acquired in 2006.”

[7] Reuters, “UPDATE 2-Rio touts Guinea iron ore potential, fends off BHP”, 29 May 2008;, last accessed 6 November 2012.

[8] See The Sunday Times, “Deal of the Century”, by Danny Fortson, 6 May 2012. The article says that presidential approval must be secured for the exploration rights to be converted to mining rights, and that such a decision would be unlikely before the mining reviews process was completed. The article also says: “a year and a half after snatching it [Simandou] up, Steinmetz sold a 51% stake of the concession — which he received for free — to Vale for $2.5 billion in August 2010.” The Financial Times also reported that “BSGR had paid nothing for its permits at Simandou, as is standard practice in the industry”; see “What lies beneath”, 7 November 2012, by Tom Burgis, Helen Thomas and Misha Glenny;

[9] Regarding ownership of BSGR, see: Financial Times, “What lies beneath”, 7 November 2012, by Tom Burgis, Helen Thomas and Misha Glenny: “The business is owned by a foundation whose beneficiaries are the Steinmetz family, with Beny Steinmetz, the Israeli tycoon, as special adviser to its subsidiaries.”;

[10] Bloomberg, “The World’s 200 Richest People”, by Matthew G. Miller and Peter Newcomb;, last accessed 6 November 2012. Forbes lists him as Israel’s second-richest man:, last accessed 6 November 2012.

[11] BSG Resources Guinea statement, 17 February 2009:, last accessed 6 November 2012. The statement says: “BSG Resources Guinea (“BSGR Guinea”) is pleased to announce that it has received a further definitive confirmation from the Ministry of Mines and Energy as well as from

the President of the Republic of Guinea that its exploration licences for the Simandou

Blocks 1 and 2 are valid and have been ratified. Furthermore, the precise boundaries of

the concession have been confirmed by the Ministry of Mines and Energy for full and

immediate implementation of operations by BSGR Guinea.”

[12] Xinhua, Guinée: la loi de finance 2010 approuvée par le président par intérim, 16 March 2010;, last accessed 7 November 2012. Expenditure under the budget was 5.8 trillion Guinean francs. Taking a rate of 1 Guinean franc = $0.000199005 on the date the loi de finances was passed, this would give budget expenditure in dollars of $1.15 billion.

[13] According to The Sunday Times piece of 6 May 2012, the next $500 million was due to be paid once agreement was reached with Liberia to build a railway line from Simandou to a Liberian port, while the remaining $1.5 billion was due to be paid once a feasibility study was completed.

[14] Regarding the $150 million investment see The Sunday Times, “Deal of the Century”, by Danny Fortson, 6 May 2012. The Zogota mine is part of the BSGR-Vale joint venture, along with blocks 1 and 2 of Simandou.

[15] “Mining firm accused of lavishing gifts in Guinea”, 5 November 2012;, last accessed 7 November 2012.