Vale Acquires Guinea Iron Ore Interest

Vale announced on April 30, 2010, it will pay $2.5 billion for a 51% interest in BSG Resources (Guinea) Ltd. (BSGR), which holds iron ore concessions in southeast Guinea. The concessions include properties that at one time formed part of Rio Tinto’s Simandou concessions but that were repossessed by the government in 2008 and sold to BSGR, a company controlled by Israeli diamond trader Beny Steinmetz. Rio Tinto has signed a memorandum of understanding with Chinalco to form a joint venture to develop the Simandou properties it still holds.

The properties held by the Vale/BSGR joint venture are Simandou South (Zogota) and iron ore exploration permits for Simandou North and Simandou Blocks 1 and 2. In an all-cash transaction, Vale is paying BSGR $500 million immediately and will pay the remaining $2 billion on a phased basis upon achievement of specific project milestones. Vale’s announcement described Simandou Blocks 1 and 2 and Zogota as “one of the world’s best undeveloped sources of high-grade iron ore, with potential to support the development of a large-scale, long-lived project, with low capex and operating costs.”

The Vale/BSGR joint venture will initially implement the Zogota project, while conducting a feasibility study for Blocks 1 and 2. First production is targeted for 2012 at a rate of 10 million to 15 million mt/y, increasing to 50 million mt/y by 2014.

Vale will be responsible for management control and marketing of the joint venture and will have exclusive rights to the off-take of all iron ore produced.

As featured in Womp 2010 Vol 05 -