The final weeks of 2016 saw an uptick in activity in the bribery and money laundering investigations surrounding mining rights in the West African country of Guinea.
On December 13, 2016, the U.S. Department of Justice arrested and charged Guinea’s former Minister of Mines and Geology, Mahmoud Thiam, with laundering $8.5 million in bribes he allegedly received from a Chinese conglomerate in exchange for, among other things, near total control of Guinea’s mining sector.
A week later, on December 19, 2016, Israeli authorities arrested and placed under house arrest Beny Steinmetz—the head of mining company BSG Resources (“BSGR”) and one of Israel’s richest men—on suspicion of bribing Guinean officials. One of Mr. Steinmetz’s colleagues, Mr. Asher Avidan, was detained on similar suspicions the next day.
Guinea is home to the world’s largest untapped deposit of iron-ore, located in the remote Simandou mountain range. The region has been the subject of fierce competition between BSGR and Rio Tinto since 2008, when the former Guinean dictator Lansana Conte stripped Rio Tinto of its mining rights to two of the four Simandou blocks in favor of BSGR. BSGR’s good fortune was short lived, however. In 2014 the new Guinean government changed course, accusing the prior regime of awarding the blocks in exchange for bribes and stripping BSGR of its concession. The government eventually handed the rights back to Rio Tinto.
The dispute over Simandou has been characterized by accusations of corruption on all sides. Rio Tinto initially filed a racketeering suit in New York against BSGR, claiming it bribed Mr. Thiam to secure the Simandou rights. The case was dismissed in 2015 on statute of limitations grounds.
In November of 2016, Mr. Thiam told Bloomberg News that, in fact, a Rio Tinto executive offered him bribes in order to win back rights from BSGR. While Rio Tinto denied the claims, it separately disclosed to the U.S. Securities and Exchange Commission an internal investigation that identified more than $10.5 million in payments to a consultant with ties to the Guinean government. Rio Tinto suspended a senior executive in charge of the Simandou project as a result of the investigation.
Following Mr. Thiam’s statements and Rio Tinto’s disclosures this past November, BSGR issued a letter demanding that Rio Tinto pay damages for the losses it sustained when Rio Tinto allegedly won-back the Simandou concession through bribery. BSGR indicated that it would sue Rio Tinto in the UK High Court unless it received a response by January 3, 2017. As of yet, no response has been made public.
Meanwhile, the U.S. Department of Justice has reportedly been investigating corruption surrounding the Simandou project. Investigations are likewise ongoing in Switzerland and in Guinea itself. And, while Israeli authorities released Mr. Steinmetz from house arrest without charges, the Israeli police indicated the possibility of more arrests in connection with the investigation.
Given the recent spate of activity, it is unlikely that this is the last anyone hears regarding corruption and Guinea’s Simandou mines.