Mining Giant Rio Tinto plc Creates Big Problems with Lawsuit Against Vale SA
In the wake of just a few days after the Guinean government had taken away vital mining permits once belonging to Vale (NYSE: VALE), Vale SA is now up against even more problems. A lawsuit has now been filed by the Australian miner Rio Tinto (NYSE: RIO) against both Vale and BSG Resources. The lawsuit contends that both Vale and BSG Resources are guilty of collusion in the effort to steal Rio Tinto’s mining concession in Guinea. Prominently called out in the lawsuit is the immense value that Rio Tinto has assigned to the Simandou iron ore deposit in Guinea.
A technical committee has already been set up by the Guinean government to investigate allegations of bribery against BSG Resources. In conjunction with this committee, President Alpha Condé had made a decision to cancel the BS Resources’ rights which was apparently influenced by the publication of a Guinea government report which alleged that BSG Resources were awarded the rights to the portion of prized mining operations through corruption and illegitimate proceedings, including bribery.
BSG Resources sold a 51 percent stake in the Simandou project to Vale in 2010. Therefore, the committee has made recommendations that the Guinean government strip both of the miners, Vale and BSG Resources, of their rights to the prize project. The government of Guinea acted as per the recommendations of the technical committee and canceled BSG Resources and Vale's mining permits. While the committee has not accused Vale of any wrongdoing, Rio Tinto has claimed that the Brazilian mining giant colluded with BSG Resources to commandeer its mining rights.
Rio Tinto previously owned the rights to the Simandou iron ore project up until 2008, at which the point the Guinean government argumentatively granted half of the mining rights to the Simandou deposit to BSG Resources. The decision was made by the then Guinea President Lansana Conte. Rio still controls half of the mining rights to Simandou deposit along with Aluminum Corp of China. And this element is a driving force behind the action Rio is currently taking, seeking compensation from Vale and BSG Resources for the billions of dollars it says it lost because of the actions of the two companies.
Rio Tinto’s new lawsuit creates a brand new problem for Vale SA since Rio is asking for significant compensation. The degree of compensation that Rio is demanding could equate to billions of dollars. This new lawsuit compounds the troubles Vale Sa is already up against, especially considering the already weak iron ore prices they’re currently dealing with, struggling with a drastic drop in profits recorded in the first quarter.
Vale invests $150mn to extend life of Manitoba operations
Vale has announced a $150mn CAD investment to extend current mining activities in Thompson, Manitoba by 10 years while aggressive exploration drilling of known orebodies holds the promise of mining well past 2040.
Global energy transition is boosting the market for nickel
The Thompson Mine Expansion is a two-phase project. The announcement represents Phase 1 and includes critical infrastructure such as new ventilation raises and fans, increased backfill capacity and additional power distribution. The changes are forecast to improve current production by 30%.
“This is the largest single investment we have made in our Thompson operations in the past two decades,” said Mark Travers, Executive Vice-President for Base Metals with Vale. “It is significant news for our employees, for the Thompson community and for the Province of Manitoba.
“The global movement to electric vehicles, renewable energies and carbon reduction has shone a welcome spotlight on nickel – positioning the metal we mine as a key contributor to a greener future and boosting world demand. We are proud that Thompson can be part of that future and part of the low carbon solution.”
Vale continues drilling program at Manitoba
Coupled with today’s announcement, Vale is continuing an extensive drilling program to further define known orebodies and search for new mineralization.
“This $150mn investment is just one part of our ambitious Thompson turnaround story. It is an indicator of our confidence in a long future for the Thompson operations,” added Dino Otranto, Chief Operating Officer for Vale’s North Atlantic Base Metals operations.
“Active collaboration between our design team, technical services, USW Local 6166, and our entire Thompson workforce has delivered a safe, efficient and fit-for-purpose plan that will enable us to extract the Thompson nickel resources for many years to come.”
The Thompson orebody was first discovered in 1956 by Vale (then known as Inco) following the adoption of new exploration technology and the largest exploration program to-date in the company’s history. Mining of the Thompson orebody began in 1961.
“We see the lighting of a path forward to a sustainable and prosperous future for Vale Base Metals in Manitoba,” said Gary Annett, General Manager of Vale’s Manitoba Operations.