Brazil prosecutors to investigate Vale over Steinmetz complaint

The logo of the Brazilian mining company Vale SA is seen in Brumadinho, Brazil

Rio de Janeiro police have begun investigating allegations brought by Israeli billionaire Beny Steinmetz that Brazilian miner Vale illegally concealed from its shareholders the conditions under which Steinmetz’s company BSGR was supposed to mine one of the world’s biggest iron ore deposits, state prosecutors said on Friday.

Vale and BSG Resources Ltd (BSGR), which entered a joint venture agreement in 2010 to develop the vast Simandou field in Guinea, are locked in a long-running legal dispute over the iron ore project.

The concession was later revoked by the Guinean government after it said it had evidence BSGR obtained the rights through corruption. BSGR denied the allegations.

In January, a Swiss criminal court found Steinmetz guilty of corruption and forgery to obtain exploration permits for iron ore and sentenced him to five years in jail over the deal BSGR secured for the project. Steinmetz said he would appeal the verdict.

In an October filing, Steinmetz alleged Vale executives had been “fraudulently concealing information from their shareholders about the true risks of the billion-dollar transaction and disclosing false information about the terms on which the deal was signed for the past ten years.”

In a memorandum dated March 18 and confirmed to Reuters on Friday, the prosecutors’ office said police would interview Vale executives and former directors as part of the inquiry.

The prosecutors’ memorandum does not state the specific risks that Steinmetz is alleging should have been disclosed to shareholders.

It does, however, refer to previous allegations by BSGR that Vale was fraudulently omitting relevant information from its shareholders and disclosing false information about the conditions under which the deal was concluded. The memorandum says that if Vale did what BSGR claims, it would constitute a crime under Brazilian law.

Reuters has no independent evidence that would support or refute this.

In a statement to Reuters, Vale said: “Vale …has no knowledge of the aforementioned inquiry.”

“Any new attempt by Mr. Steinmetz to try to evade his responsibility to indemnify Vale will certainly have the same outcome of the convictions already imposed on him,” it added.

“Steinmetz will also answer in civil and criminal courts for his fallacious maneuvers.”

Steinmetz was not immediately available for comment.

BSGR is still seeking to reopen an arbitration case in London that ordered it to pay $1.25 billion to Vale for its investment in Simandou. Vale had accused BSGR of fraudulently inducing it to buy the 51% stake in the mine.

BSGR went into voluntary administration to protect it from legal disputes in 2018.

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