Today 7:46 PM ET (Dow Jones)
By Paul Kiernan RIO DE JANEIRO--The government of Guinea revoked mining licenses for Vale SA's joint venture Friday, ending the company's ill-fated quest mine an untapped West African lode of iron ore.
The decision had been expected after a Guinean government committee found that Vale's joint-venture partner, BSG Resources Limited, had obtained concessions to the Simandou and Zogota mining areas through corrupt practices. Guinea's cabinet voted earlier this month to accept the findings of the committee, which was set up three years ago to investigate mining deals signed before current President Alpha Condé took office in 2010.
Vale wasn't implicated in the committee's report and said it acquired a 51% stake in the Guinean joint venture only after "extensive due diligence." BSG Resources has vehemently denied wrongdoing, while Vale says the alleged corruption took place more than a year before it invested in Guinea.
It is unclear what the next step will be for Vale, the world's top producer of iron ore, which might not be barred from future mining licenses in Guinea. The company said Friday it was "actively considering its legal rights and options."
Vale acknowledged, in its 2013 annual report, the possibility of losing its entire investment in Guinea pending the government's decision. The book value of Vale's stake in the joint-venture stood at $1.1 billion at the end of last year.
The effort to extract iron ore from the Simandou mountains--believed to hold some of the world's last big, undeveloped deposits of high-quality iron ore--was a project launched by former Vale Chief Executive Roger Agnelli, near the end of a commodities boom that brought unprecedented iron-ore prices.
Analysts say current Vale CEO Murilo Ferreira is more conservative than his predecessor. Mr. Ferreira has focused, since 2012, on cutting costs and prioritizing the company's iron-ore expansion projects closer to home in Brazil.
Write to Paul Kiernan at paul.kiernan@wsj.com
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(END) Dow Jones Newswires
April 25, 2014 19:46 ET (23:46 GMT)
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