Israeli Billionaire Takes Africa Mine Fight to Vale Homebase

(Bloomberg) -- Brazilian prosecutors will ask police to investigate allegations against Vale SA made by Israeli billionaire Beny Steinmetz as part of an almost decade long-legal dispute surrounding the world’s biggest untapped iron deposit.

Steinmetz filed two complaints in October, accompanied by a legal opinion by Sergio Moro, the former Brazilian Justice Minister who oversaw the Car Wash corruption investigation in the South American nation. In a complaint to federal authorities, Steinmetz accuses Vale of influence peddling, while in a second to state authorities, he alleges it kept shareholders in the dark about the risk of buying into the joint venture. Vale denies the accusations.

The request for a police probe will be issued in the next few days, prosecutor Carolina Bonfadini de Sa said by email. Newspaper Valor reported the complaints earlier Thursday.

What started in Guinea as a partnership in one of the world’s richest mineral deposits has devolved into a globe-spanning feud. As surging Chinese demand for raw materials spurred a race for assets in Africa, Steinmetz acquired the rights to the Simandou iron-ore project in 2008. Vale bought a 51% stake about a year later. Then a new president in Guinea seized back the asset after a corruption probe. Vale was awarded $2 billion in a London arbitration last year that it’s still trying to collect.

‘Desperate Attempt’

In a response to questions, Rio de Janeiro-based Vale said Steinmetz’s requests for an investigation in Brazil are “just another desperate attempt” to evade payment. Vale said it was confident the Brazilian justice system would side with international courts by finding that it had no knowledge of the corrupt actions. Last year, the London Court of International Arbitration found that Steinmetz’s BSG Resources Ltd. made fraudulent representations to Vale when it sold the stake.

Steinmetz’s complaints in Brazil come at a difficult time for Vale, the world’s second-largest iron ore miner, after two fatal disasters at its operations in the country that has seen it face legal and political pressure. Vale is in talks with Brazilian officials on a settlement for the Brumadinho dam collapse, for which the company has earmarked 19 billion reais ($3.7 billion). Prosecutors in the country are also seeking to reopen a 155 billion-real lawsuit for damages from a dam disaster five years ago.

“It’s time for justice now,” Steinmetz said in an interview on Thursday. “We have been Vale’s scapegoat in this story for a long time. I think the tide has turned.”

Steinmetz has a long history in difficult environments across the globe after having been originally sent out by his family to secure supplies of rough diamonds. He developed a diamond mine in Sierra Leone before setting his sights on Simandou in neighboring Guinea.

Ailing President Lansana Conte stripped Rio Tinto Group of its rights to half of the asset, which the Anglo-Australian miner hadn’t developed in a decade of control. The rights lost by Rio Tinto were transferred to Steinmetz weeks before the president died in 2008. Then BSGR sold half the asset to Vale.

Dossier Allegations

After Alpha Conde was elected in 2010, he announced a review and cleanup of the mining industry, Guinea’s main source of income. Billionaire George Soros and former U.K. Prime Minister Tony Blair advised on and funded Conde’s initiative. A dossier of alleged corruption became the basis for BSGR’s loss of rights. BSGR denied it paid any bribes.

The Israeli businessmen has been seeking to apply pressure on the company and find new evidence to overturn the arbitration ruling. Earlier this year he employed Black Cube, the private intelligence agency run by former Israeli spies, to arrange a sting operation targeting former Vale employees, collecting evidence that he says shows they knew the deal was problematic before they agreed to it.

“We are business people but also fighters, and we know how to fight back. We’re looking for justice,” Steinmetz said. “We want to clear our name totally. We want them to stop immediately all legal action against BSGR and me.”

His complaint to Brazilian federal authorities centers around a $250 million payment the company allegedly considered paying for the right to meet with the Guinea government.

Vale retorted: “Unfortunately, Steinmetz now seeks to use Brazilian institutions to try to achieve his illegitimate ends, based on clandestine actions and on unfounded facts and premises.”

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