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LONDON — Aerial photographs of the 110-kilometre Simandou mountain range in southern Guinea depict a surreal landscape. Wherever the forest and grasslands are scraped away, the exposed earth is rust red or burnt orange, as if a child had splattered ketchup on a sheet of green paper. The vivid colours are the product of the unusually rich iron oxides in Simandou’s iron ore lode.
Simandou has been called the El Dorado of iron ore; it’s thought to be the biggest untapped resource of its kind on the planet and is worth a fortune. The problem is, too many companies want a piece of it and the intrigue and alleged corruption that have surrounded its exploitation seem lifted from a John le Carré espionage novel.
The battle for Simandou’s iron ore has gripped the mining world for more than a decade. It has pitted two of the world’s biggest miners – Rio Tinto Group and Vale SA – against each other and ensnared an unlikely resources player in the form or Beny Steinmetz, the buccaneering Israeli billionaire who built an empire out of diamonds and recruited Vale as his Simandou partner.
A racketeering case against Mr. Steinmetz and Vale is underway in New York, and investigations into possible fraud by Mr. Steinmetz and companies associated with him are ticking away in several countries, including the United States and Switzerland.
The outcome of the battle for Simandou could be decided shortly as the corruption probes and court cases proceed. No one has more to lose than Mr. Steinmetz, who potentially faces indictments for bribery in the United States. He may soon discover that iron ore and diamonds don’t mix.
In 1997, Anglo-Australian mining giant Rio Tinto poked around Simandou and realized that Simandou’s red earth had the potential to make it the king of the global iron ore market for decades. It was granted exploration permits for most of Simandou and, in August, 2008, officially put the size of the resource, which would cost $20-billion (U.S.) or more to develop, at an extraordinary 2.25-billion tonnes. Four months later, the Guinean government stripped Rio Tinto of fully half of the Simandou concession and handed it to a small company called BSGR – Beny Steinmetz Group Resources.
BSGR paid nothing for the concession, thought it did invest $160-million (U.S.) in the project and produced a mining feasibility study, and later sold 51 per cent of it to Vale, the Brazilian mining biggie that had bought Canada’s Inco in 2006, for $2.5-billion (U.S.), or $1-billion more than the entire annual budget of the Guinean government.
In the iron ore game, it was considered the deal of the decade and the purchase stunned the global mining and African business worlds. At a conference in Dakar, Mo Ibrahim, the Sudanese telecommunications magnate, said, “Are the Guineans who did that deal idiots or criminals or both?”
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