Guinea has extended a deadline to request
tender document for blocks 1 and 2 of the giant Simandou iron ore deposit, given
up by Israeli tycoon Beny Steinmetz earlier this year, in an effort to boost competition
of the world’s most-fabled mineral deposits.
The West African country launched the international tender in mid-July, giving companies until Aug. 2 to outline their bids. Given the complexity of the process, however, the government has decided to allow more time for interested parties to prepare, an official close to the tender told Reuters on Tuesday.
Potential bidders now have until Aug. 19 to withdraw the necessary documents to prepare their proposal and the new deadline for submitting the offer should be revealed soon, the source noted.
At two billion tonnes of iron ore
with some of the highest grades in the industry, Simandou is one of the world’s
biggest and richest reserves of the steelmaking material, but it has a
For more than a decade, it was the
centre of a bitter dispute that involved Rio Tinto, Brazil’s Vale SA and
Israeli diamond mining tycoon Beny Steinmetz.
In 2008, one of Guinea’s former
dictators stripped Rio’s rights over two of the four blocks the deposit had
been divided on and handed them BSG Resources, the mining arm Steinmetz. Rio
was able keep to the two southern blocks, but only after paying $700 million to
the government in 2011. That guaranteed the miner tenure for the lifetime of
the Simandou mine.
That deal came under scrutiny in
2016, forcing Rio to fire two senior managers over a questionable $10.5 million
payment made to a consultant who helped the company secure the two blocks and
alerted authorities, including the US Department of Justice and the UK’s Serious Fraud Office.
BSG Resources and Steinmetz were
also subject of several investigations over bribery and corruption accusations, but it was able to put an end to
and to all that in February this year, through a deal with Guinean President Alpha Conde.
As part of the agreement with Guinea, BSGR agreed to walk away from blocks 1 and 2 of the Simandou project, but retained the right to mine the smaller Zogota deposit.
A few weeks later, a London arbitral court told BSGR to pay $1.2 billion to Vale, its former partner Guinea, due to “fraud and breaches of warranty” in inducing the Brazilian miner to enter the joint venture. The tribunal based its decision partly on the fact that the government revoked the concession in 2014 after finding that BSGR had obtained it by bribing officials.
Tender transparency questioned
Strong iron ore prices and the resolution
of Steinmetz-related issues increased Guinea’s chances of finding companies
interested in acquiring the rights for the vacant blocks, pushing it to launch
But analysts, including Eric
Humphery-Smith from Verisk Maplecroft, have called the transparency
of the process into question.
One of the main reasons, argues Eric Humphery-Smith, an analyst at Verisk Maplecroft in London, is that prospective developers must pay $300,000 to access tender specification documents.
“Such pay-to-play terms undermine
the Minister’s claims of transparency,” Humphery-Smith says.
The experts notes that while it’s true that the current process is more transparent than the first-come, first-served method, bidders may still be exposed to reputation risks:
“There are indications that the British law firm Phanar Legal Ltd, selected as the third-party transaction adviser for the tender, may have a conflict of interest. The firm’s director Philip Rogers is a co-director of Guinea Bauxite Corporation Ltd (GBC), a mining company established in January 2019 by Alexander Zotov, a Russian businessman. Zotov holds an active production licence for a bauxite mine in coastal Guinea through his mining company Eurasian Resources (EAR).
“Even if Rogers acts only as a secretary for these companies, his active interest in the Guinean mining sector leads one to question his law firm’s impartiality in the Simandou tendering process. In other words, Phanar’s management of the tender could lead the contracting authorities to look favourably on a prospective bid by one of Zotov’s companies for another mine concession.”
Rio Tinto holds a 45% stake in blocks three and four of Simandou, which is actively planning to develop. State-controlled Chinalco owns 40% and the Guinea government 15%.