MAC: Mines and Communities

Judge dismisses multi-billion dollar Rio lawsuit against Vale

Published by MAC on 2015-11-22
Source: Reuters, Mining.com (2015-11-21)

Rio Tinto has failed - at least for now - in making Vale guilty for what it claims was the Brazilian mining giant's involvement in a "conspiracy" to  misappropriate its rights to one of the world's largest iron ore deposits - Simandou North in Guinea.

A US judge has ruled that the UK-Australian company had run out of time in filing its lawsuit.

But Rio Tinto isn't likely to take this rebuff lying down, and will almost certainly appeal the verdict.

Comment by Nostromo Research: It's curious that Rio Tinto's lawyers didn't perceive that this case would be "out of time" when, in the 1980's, they used precisely that argument to strike down another case in the UK High Court.

This was one submitted by Leigh Day & Co on behalf of Edward Connelly, who claimed he had contracted cancer while working at Rio Tinto's Rossing uranium mine in Namibia between 1977 and 1982.

It's even more puzzling that Rio Tinto should argue in the recent Guinea case that the judge had ruled on what it calls "a narrow point of law".

That's certainly not the view it held when it was intent on destroying Edward Connelly's credibility.

Previous article on MAC: UK court orders hand over of Simandou-related documents

U.S. judge dismisses Rio Tinto lawsuit against Vale

By Alonso Soto and Brendan Pierson

Reuters

20 November 2015

BRASILIA/NEW YORK - A U.S. judge on Friday dismissed Rio Tinto's lawsuit accusing rival Vale and others of conspiring to misappropriate its mining rights in the Simandou region in Guinea.

Simandou has some of the world's most valuable iron ore deposits. Rio Tinto had said in its April 2014 lawsuit that Vale had conspired with Israeli billionaire Beny Steinmetz and BSG Resources.

But U.S. District Judge Richard Berman in Manhattan said on Friday that Rio Tinto had waited too long to file the lawsuit after losing the mining rights in December 2008.

Under the Racketeer Influence and Corrupt Organizations Act, a U.S. anti-conspiracy law, the Anglo-Australian company would have had to sue within four years, the judge said.

"Judge Berman's decision was focused on a narrow point of law and he did not rule on the evidence Rio Tinto has been gathering in the case," Rio Tinto said in a statement. "Rio Tinto is free to both appeal Judge Berman's decision and pursue its claims in other forums, and is actively looking at all options."

Vale said it was very satisfied with the decision.

"From the start, Vale has kept the most solid conviction that those allegations were groundless," Vale said in an emailed statement.

Rio Tinto had accused the defendants of devising a fraudulent scheme to steal its rights over the northern half of Simandou.

The complaint said Rio Tinto had spent hundreds of millions to develop Simandou until 2008, when former President Lansana Conte's government revoked its permit on the northern half of the deposit and then transferred it to BSG, the mining branch of Steinmetz's conglomerate.

At the time, the government told Rio it had moved too slowly, but Rio Tinto said it had complied with the terms of the leases.

BSG then sold 51 percent of its Guinean assets to Brazil's Vale in 2010, when they created joint venture VBG in a $2.5 billion deal.

A Guinean government panel charged with reviewing the West African nation's mining deals later said it had found BSG obtained the rights through "corruption." The government stripped BSG and Vale of their rights over Simandou and the Zogota deposits shortly before Rio Tinto filed its lawsuit last year.

Guinean President said at the time that Vale had nothing to do with the corruption alleged by the government panel. BSG has repeatedly denied any wrongdoing and has sought international arbitration.

(Reporting by Alonso Soto in Brasilia and Brendan Pierson in New York; Editing by Lisa Von Ahn, Andrew Hay and Bernard Orr)


Judge throws out multi-billion dollar Rio lawsuit against Vale

Frik Els

Mining.com

20 November 2015

The mining lawsuit of the century ended with something of a whimper on Friday after a US judge dismissed Rio Tinto's lawsuit against Vale over rights to one of the biggest prizes in mining.

Rio Tinto filed suit in April for billions of dollars against Vale and BSG Resources, a company with links to diamond king Beny Steinmetz, alleging that the two companies acquired the rights to northern block of the Simandou deposit in Guinea, West Africa in December 2008 through corrupt means.

According to Reuters, US District Judge Richard Berman in Manhattan said that Rio "had waited too long to file the lawsuit" under the Racketeer Influence and Corrupt Organizations Act, which calls for a four year time limit.

Guinea is home to some of the richest and easily exploitable iron ore fields outside of Australia's Pilbara region where Rio Tinto's operations are centred and top producer Vale's Brazilian home base.

Rio Tinto held the licence for the entire deposit, but was stripped of the northern blocks by a former dictator of the country, one of the poorest in Africa. BSGR acquired the concession later that year after spending $160 million exploring the property.

In 2010 BSGR sold 51% to Vale for $2.5 billion. The Rio de Janeiro-based company stopped paying after the first $500 million after missing a number of development milestones. Then the new Guinean government under Conde launched a review of all mining contracts awarded under previous regimes and launched an investigation into the Vale-BSGR joint venture.

The Guinea government withdrew the mining permit in April, accusing BSGR of obtaining its rights through corruption prompting the Rio lawsuit. In the filing Rio had alleged that BSGR paid a $200 million bribe to Guinea's former minister using funds from Vale's initial payment.

BSGR has denied wrongdoing and filed an arbitration request in an attempt to win compensation from the Western African nation. Steinmetz has previously called the Guinean probe's findings a “smear campaign” against him. A separate Swiss and US probe into the corruption allegations are ongoing.

In May last year, the Guinea government and Rio and its partners – China's Chalco together with the World Bank – inked a game-changing $20 billion deal for the southern section of Simandou.

The agreement calls for a new 700km railway across the country to Conakry, Guinea's capital in the north, plus a new deep water port at a conservatively estimated cost of $7 billion; infrastructure investments that will transform the economy of the impoverished country.

Simandou with 1.6 billion tonnes of reserves and some of the highest grades in the industry (66% – 68% Fe which attracts premium pricing) has a back-of-the-envelope calculation value of more than $80 billion at today's prices.

At full production Rio's Simandou concession would export up to 100 million tonnes per year – compared to Rio's total capacity at the moment of around 360 million tonnes per annum. Simandou would by itself be the world's fifth-largest producer behind Australia's Fortescue Metals and BHP Billiton.

Rio acquired the rights for the vast mountain deposit more than 15 years ago and has already spent more than $3 billion advancing the project. A feasibility study was due to be completed by July, but the ebola outbreak halted work at the site for months with hundreds of contract workers pulling out of the country.

But with the price of the steelmaking raw material languishing not far off decade lows around $45 a tonne on Friday and global mining companies in belt-tightening and cost cutting mode even projects like Simandou are being cautiously advanced.

Last month the government of Guinea expressed frustration at the slow pace of development at Simandou with President Alpha Conde taking a new tender for another part of the deposit slowly because “we don’t want our minerals to be put out to pasture anymore.”

Whether Guinea really has leverage to make the Anglo-Australian giant shift focus from existing operations is an open question. Even at the current development clip, it's doubtful Simandou will ship ore before 2020 and likely only by the middle of the next decade.

Glencore was said to be eyeing the Simandou North deposit, but in the year since high-level representatives of Glencore travelled to Conakry to meet with government officials, the financial situation of the Swiss commodities trader and miner has been turned on its head. Anglo American at the time also said it has no plans to take on a project of this size.

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