BSG Resources Limited said it sent a letter to Rio Tinto plc Monday alleging that Rio Tinto contributed to the loss of BSGR’s mining rights in Simandou, Guinea by paying bribes and making false allegations.
The 14-page “letter before action” provided to the FCPA Blog demanded a response from Rio Tinto by January 3, 2017, “including proposals to pay BSGR damages.”
BSGR said it will sue Rio Tinto in the UK High Court unless it receives a “satisfactory response” by the January 3 deadline.
The Guinea Simandou site contains the world’s biggest untapped iron-ore deposit.
“BSGR’s estimate of its loss runs to billions of U.S. dollars,” the letter said.
Last month Rio Tinto said in a U.S. securities filing that it suspended the chief executive of its energy and minerals division while it investigates more than $10.5 million paid to a consultant for the Simandou project.
Alan Davies was in charge of Simandou in 2011 when the payments for “advisory services” were allegedly made, according to Rio Tinto’s filing.
London-based Rio Tinto said it learned about the payments in August this year from internal email correspondence.
BSGR cited some of those emails and quoted from them in its letter Monday.
Rio Tinto’s Legal & Regulatory Affairs group executive Debra Valentine stepped down last month. She previously notified the company of her intention to retire on May 1, 2017.
BSGR said in Monday’s letter that Rio Tinto “paid a facilitation fee / bribe to Francois de Combret in return for assistance with negotiations with [Guinea’s president] Alpha Condé, his son Mohamed Condé, and the [government of Guinea].”
BSGR said Guinea then awarded mining rights to Rio Tinto. “This was only possible by means of a facilitation fee / bribe paid to Francois de Combret,” the letter said.
BSGR is the mining arm of Israeli billonaire Beny Steinmetz’s family-controlled conglomerate.
In addition to the alleged bribe, BSGR said Rio Tinto spread false information to Guinea officials about Steinmetz.
The BSGR letter said a delegation from Rio Tinto met with Guinea’s mining minister in early 2009.
The letter said,
The delegation made very serious allegations of corruption against BSGR, although they did not provide any evidence in support of their allegations. These included that BSGR was a corrupt organisation involved in arms trading, that Beny Steinmetz’s French passport had been revoked on account of his connection to corruption, that no major bank was prepared to do business with BSGR and that the company had no experience in the mining sector.
“There was no truth to those allegations at all, as Rio Tinto well knew,” BSGR said in Monday’s letter.
The government of Guinea stripped Rio Tinto of half the Simandou project in 2008 for alleged non-performance.
The rights then went to BSGR. BSGR teamed up with Brazil’s Vale SA to acquire control of Simandou.
But Rio Tinto won the rights back in 2011 after the Guinea government stripped them from BSGR and Vale, alleging the companies had acquired them illegally.
In November last year, a U.S. federal judge dismissed a RICO lawsuit filed by Rio Tinto that alleged Steinmetz and BSGR conspired to steal the Simandou project.
U.S. District Judge Richard Berman in New York ruled that Rio Tinto’s claims in 2014 were barred by the four-year statute of limitations.
The judge also said Rio Tinto failed to alleged ia pattern of racketeering activity by the defendants that could support a RICO claim.
BSGR and Vale have denied any wrongdoing.
In Monday’s letter, BSGR said the “revocation of Rio Tinto’s rights in Simandou Blocks 1 and 2 had nothing to do with BSGR, and everything to do with Rio Tinto’s breaches of the 1995 Mining Code and its persistent failure to develop its iron ore project.”
“The [government of Guinea] made this absolutely clear at the time, and subsequent legal advice to President Condé confirmed it. However, from the start Rio Tinto held BSGR responsible and set out to recover its rights,” the letter said.
UK practice rules require so-called “pre-action” letters before certain civil lawsuits can be filed.
BSGR said its letter to Rio Tinto set out the basis for claims for “inducement to breach a contract and intentionally causing loss by unlawful means.”
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BSGR’s December 12, 2016 letter before action to Rio Tinto plc is here (pdf).
Richard L. Cassin is the publisher and editor of the FCPA Blog.