Benny Steinmetz (file)
Benny Steinmetz (file)Flash 90

An investigation by the African state of Guinea has recommended that the mining arm of Israeli diamond magnate Benny Steinmetz's business empire be stripped of rights to the world's biggest untapped iron-ore deposit, because it obtained them through corruption.

BSG Resources (BSGR) won the rights in 2008 to the northern half of a deposit beneath the Simandou mountains for a fraction of their value, in a deal signed on the deathbed of military dictator Lansana Conte that raised eyebrows across the world.

The two-year review by a government committee, made public on Wednesday, will likely leave in tatters a $2.5 billion (1.8 billion euro) agreement in 2010 for the sale of BSGR's Guinean assets to the Brazilian mining giant Vale.

The committee said in its 33-page report it had "precise and consistent evidence establishing with sufficient certainty the existence of corrupt practices" in the way BSGR won the rights.

In response to the allegations, BSGR said in a statement on its website that it "will prove these allegations are false."

"The Guinean government is relying on fabricated claims, compromised witnesses and illegitimate processes to justify... Conte's carefully orchestrated plan to reward political allies who allegedly helped rig his election by providing them with BSGR's legally acquired mining rights."

Steinmetz, a 58-year-old father-of-four, is said to be one of Israel's richest businessmen, with a wealth of around $6.7 billion, according to the Bloomberg Billionaires Index.

Details of the report findings

The report claimed Steinmetz's company -- which spent $160 million exploring the Simandou site -- used intermediaries to pay bribes to Mamadie Toure, the wife of Conte. The president ran the poor west African nation for 24 years before his death.

The report says Toure admitted receiving payments totaling more than $3 million in cash and shares from BSGR starting in 2006, and to have signed a contract for a further $5 million in 2010.

"Such corrupt practices nullify the mining titles and the mining convention," the committee said. The report outlines evidence handed to Guinea by the FBI, which investigated Frenchman Frederic Cilins, a former BSGR lobbyist in Guinea.

Last month Cilins admitted obstructing the US investigation and faces four years in jail. He was arrested at Jacksonville airport in Florida in April 2013, after the FBI recorded him offering Toure bribes to destroy the BSGR contracts before they fell into the hands of US investigators, the Manhattan federal court heard.

The Guinea mining review committee concluded that a joint venture company established by BSGR and Vale be stripped of the concessions, which will be put out to tender if the government takes up the recommendation.

The committee said it was unlikely that Vale had been involved in corruption and recommended that it be permitted to bid again for the concessions, but said that BSGR should be barred. Vale has said it entered into the venture on the basis that the concessions had been obtained "lawfully and without any improper promises or payments".

The company is understood to have paid $500 million up front and is reportedly planning legal action against BSGR, which is registered in Guernsey.

Guinea suffering from Ebola

Guinea has been in the news recently, as just two weeks ago the country's government confirmed that the lethal Ebola virus had broken out in the capital city of Conarky.

At the time, the recent outbreak had already claimed 62 lives in rural areas of the impoverished African nation.

Already the world's largest producer of bauxite, used to make aluminium -- Guinea has many other untapped minerals, including diamonds, gold and uranium.

It is trying to move on, following decades of military dictatorships and misrule, after its first democratic elections in 2010. Ethnic conflict has played a key role in the west African nation's troubled past, and violence rocked the country in the wake of parliamentary elections won by the party of President Alpha Conte last year.

It remains one of the region's poorest nations, with a stagnating economy and inflation at 13%, and youth unemployment estimated at 60%. It ranks 178th out of 187 countries on the UN's Human Development Index.