Rio Tinto Sued By Beny Steinmetz Company Amid Guinea Corruption scandal

Rio Tinto’s Guinean payment scandal has deepened, with bitter rival Beny Steinmetz threatening to sue for billions of dollars in damages after alleging the leaked emails at the centre of the scandal show Rio had a hand in stripping his company of valuable iron ore tenements in the African nation.

In a dramatic 14-page letter sent to Rio chief executive Jean-Sebastien Jacques and chairman Jan du Plessis, Mr Steinmetz’s company BSG makes a series of explosive claims.

It alleges that Rio had sought to intimidate its staff with low flying helicopters, hired private detectives to investigate its operations and conducted a lengthy smear campaign as part of efforts to keep Mr Steinmetz from winning the right to mine the Simandou tenements in Guinea.

BSG alleges that “facilitation fees/bribes” paid by Rio to its controversial political adviser in Guinea, Francois de Combret, demonstrated that Rio “induced and or procured” the Government of Guinea to breach its agreements with BSG over Simandou.

The letter continues a battle that has been running between Steinmetz and Rio for close to a decade, and deepens the crisis that emerged on November 9 when Rio announced it had contacted fraud and securities agencies in the UK, US and Australia over the payments to Mr de Combret.

Rio contacted the authorities after emails from 2011 between energy and minerals boss Alan Davies, then-chief executive Tom Albanese and then-iron ore boss Sam Walsh emerged, and appeared to show the men to be discussing a payment to Mr de Combret.

Mr Davies, Rio’s legal affairs executive Debra Valentine and the company’s organisational resources boss, Hugo Bague, have since left Rio in relation to the Guinea saga.

The bad blood between Rio and BSG stems back to 2008, when the Guinean government stripped Rio of its rights to four tenements that contained the Simandou iron ore deposit.

Two of the four Simandou tenements were awarded to BSG that same year, and BSG promptly sold a stake in the project to Brazilian miner Vale.

Rio would later accuse Vale and BSG of running a conspiracy to convince the Guinean government to strip Rio of the rights then claim the giant iron ore project for themselves. Those claims were tested in a US court in 2014 but dismissed in 2015.

By 2011, Rio had regained control of two of the Simandou tenements, after making a controversial $US700 million settlement payment to the Government of Guinea.

A review by the Guinean government into the circumstances in which BSG claimed control of the other two tenements saw BSG stripped of those tenements in 2014.

BSG alleges that Rio worked to damage its reputation with the Government and the public. It claims a Rio Tinto delegation met with Guinea’s then mines minister Mahmoud Thiam in 2009 and made serious allegations of corruption against BSG to the minister.

BSG claims the Government of Guinea breached its mining code and an investment code when it stripped BSG of the rights, and that Rio “knowingly induced” and or “procured” that outcome.

“Rio Tinto intentionally interfered with BSGR’s interests in order to bring about the revoking of its mining rights in Simandou,” said BSG in its letter.

BSG is seeking damages for the loss of the Simandou mining rights, reputational harm, loss of business opportunities due to the claims Rio made about BSG, and the loss of money that would have been paid by Vale, which planned to work as BSG’s joint venture partner on Simandou.

BSG also claims that Rio had suppressed the information in the leaked letters between Walsh, Albanese and Davies for more than a year.

Rio Tinto indicated on Tuesday that it would defend BSG’s latest claims.

“If BSGR ultimately brings a claim, Rio Tinto expects to defend itself robustly,” a company statement said.

Rio shares have been largely unaffected by the Guinea scandal in recent weeks, having continued a rally that has been under way all year.

But the stock closed 2.4 per cent, or $1.54 lower on Tuesday at $61.25.

That slide was greater than the 0.76 per cent fall in BHP shares on Tuesday, which saw BHP shares close at $26.12.

Several forecasters, including Credit Suisse and Morgan Stanley, have upgraded their commodity price forecasts in recent weeks, and Morgan Stanley has set share price targets of $70 and $30 for Rio and BHP respectively.

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