Guinea targets 3 firms in resource contract review

Guinea is focusing a review of its resource contracts on three deals that it says were signed under murky conditions, including an agreement involving one of the world's biggest iron ore deposits, a source close to the review said.

They include BSG Resources' deal to obtain half of the giant Simandou iron ore concession, RUSAL's purchase of the Friguia alumina refinery, and Hyperdynamics' rights to nearly a third of Guinea's offshore oil blocks.

President Alpha Conde came to power in the West African country in 2010 with a promise to clean up and strengthen Guinea's minerals sector, whose rich gold, diamond, bauxite and iron ore reserves have attracted little investment due to decades of corruption and turmoil.

The government has moved to overhaul the mining code and review existing contracts, especially those signed during the 2009-2010 period when the country was ruled by a military junta.

"For several decades, the Guinean mining sector was marred by corruption, uncertainty and lack of transparency ... Our mission is to ensure that those agreements were concluded in accordance with the legal provisions in force at the time," Nava Toure, president of the technical committee charged with carrying out the review, said in a statement.

BSG Resources, owned by Israeli diamond billionaire Beny Steinmetz, reached a deal in 2008 to control half of the Simandou iron ore deposit - one of the largest unexploited reserves in the world. No cash payment was involved, although it invested $160 million in the project and pledged to spend $1 billion to rebuild a railroad. In 2010 it sold half of its stake for $2.5 billion to joint venture partner Vale. The huge Brazilian miner has since put the project on hold, however, in favour of others closer to home.

The government has accused BSG Resources of using bribes to gain access to the rights.

BSG Resources has denied the charges and accused Guinea's government of seeking to illegally seize its assets after it received notice its contract was being investigated over allegations of bribery.

Texas-based Hyperdynamics began operating in Guinea in 2002 after acquiring exclusive rights to the country's offshore oil blocks. After a public outcry over its deal, the company relinquished 70 percent of its holding in 2009.

A Hyperdynamics spokesman said the company had not been contacted by the committee reviewing contracts. Russia's RUSAL, has been accused by the government of underpaying for the 640,000 tonnes a year Friguia alumina refinery, where operations have been at a virtual standstill since April due to a labour dispute.