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BSG vows to clear its name after bribery allegations, fight for return of Guinea assets

KOIDU MINE, SIERRA LEONE BSGR is currently in cut three at Koidu’s pit, which forms part of its $150-million expansion project

BSG Resources mining and metals CEO Marc Struik provides an update on the company’s legal battles with the government of Guinea and Rio Tinto, as well as the status of the rest of its operations.

KOIDU MINE, SIERRA LEONE BSGR is currently in cut three at Koidu’s pit, which forms part of its $150-million expansion project

6th March 2015

By: Ilan Solomons

Creamer Media Staff Writer

  

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Iron-ore, diamond and ferronickel mining company BSG Resources (BSGR) is determined to clear its name and ensure that its assets in Guinea are “returned”, the company’s mining and metals CEO, Marc Struik, tells Mining Weekly.

The two primary court cases in which the company is involved concern mining giant Rio Tinto and the government of Guinea.

In April 2014, Rio Tinto filed a suit in the US state of New York against BSGR and Brazilian mining giant Vale, its joint venture (JV) partner in the Simandou project. Rio Tinto claims that BSGR and Vale had fraudulently dispossessed it of its mining rights – essentially through the alleged bribery and corruption of government officials – in 2008, when former President Lansana Conte’s government revoked Rio Tinto’s permit and transferred it to BSGR.

In November 2014, BSGR initiated legal action against President Alpha Condé and the government of Guinea for what the company believes are “corrupt practices” and “illegal activities” in terms of government having revoked BSGR’s mining licences for the Zogota and Simandou Blocks 1 and 2 iron-ore deposits, in south-east Guinea, last year.

BSGR initiated arbitration proceedings regarding the issue with the government of Guinea with the International Centre for Settlement of Investment Disputes (ICSID) last year and the matter will be heard by the International Chamber of Commerce in Paris, France.

“The ICSID has not yet set a specific timetable for the procedings, but the case will be heard in due course,” says Struik.

Despite this, Guinea Mines and Geology Minister Kerfalla Yansane told news agency Reuters in an interview on the sidelines of the 2015 Investing in Africa Mining Indaba conference, held in Cape Town from February 9 to 12, that his department was completing the documents for the auction of the northern half of Simandou, which was previously owned by BSGR and Vale.

“I believe that these documents will be ready in the next two months,” he stated.

Struik says: “The government of Guinea is trying to promote a tender for the illegally confiscated assets to distract attention from the proceedings BSGR has initiated against them through the ICSID. The tender will not be taken seriously by the market because they are well aware of the contested nature of these assets. “BSGR will challenge any transfer of these assets in the applicable jurisdictions.”

He avers that the ICSID will demonstrate that the government of Guinea’s decision to seize BSGR’s assets was made before the Technical Committee on the Review of Mining Titles and Agreements was even established.

The technical committee was established by Condé in 2010 to review all the country’s past mining contracts.

“The findings of the committee are a fabrication, which were created to justify government’s actions in the eyes of the international investment community and its high-profile backers who have ended up being complicit in these actions,” Struik declares.

There will be “little appetite” for entering into any type of commercial agreement with the government of Guinea because of this “hypocrisy” and its inability to protect and accommodate the legitimate investment, he adds.

Nonetheless, Yansane told Reuters that there was no link between the arbitration and the auction, as the Zogota and Simandou assets belonged to the government of Guinea.

Other Operations

Struik notes that, since 2002, BSGR has invested more than $300-million in its 100%-owned diamond mining subsidiary Octea, in Sierra Leone, which owns and operates the Koidu kimberlite project, situated in the Tankoro chiefdom of the Kono district, in the Eastern province of Sierra Leone.

He states that BSGR’s investment has transformed mining at Koidu from a small-scale manual operation into one of the country’s largest employers, with a permanent staff complement of 1 100 in 2014, of whom 85% are locals.

“Koidu’s production capacity will be expanded to about 540 000 ct/y – a fivefold increase, compared with previous production values. “Over the life of the mine, operations will shift from openpit to underground mining and will produce more than five-million carats from the current known resource estimate,” according to Koidu’s website.

Further, Struik points out that BSGR is currently in Cut 3 at Koidu’s pit, which forms part of the its $150-million expansion project that involves a five-year openpit mining phase, transitioning to an underground mining operation that will include the extraction of kimberlite from the known dykes and blows.

The expansion project comprises an openpit mine that has ramped up from 30 000 t/m to 1.5-million tonnes a month.

Feasibility studies for the underground mine are in their final stages and the detailed design will include the development of portal, decline and underground infrastructure.

BSGR is also a 50:50 JV partner with Swiss-headquartered mining and exploration company International Mineral Resources in international mining and metals company Cunico Resources.

Struik points out that Cunico is the largest ferronickel producer in Europe, and holds a significant position in terms of world production.

Cunico’s production and mining sites are located in Macedonia and Kosovo. The company also has mining sites in Guatemala and Albania and last year bought mining assets in Turkey through its wholly owned subsidiary, Cunico Madencilik.

Cunico’s operations collectively produce about 29 000 t/y of ferronickel and process about 2.6-million wet metric tons of nickel ores.

“BSGR is also aiming to buy new assets and we are considering buying one or two assets in South Africa. I cannot give details about these assets yet, but we believe that, with the right partners, there is great potential to establish new mining operations in the country,” Struik concludes.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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