Vale acquires 51-per cent in BSG for $2.5-billion; may scuttle Rio-Chinalco Guinea deal

Brazil's Vale, the world's second largest miner after BHP Billiton, which today disclosed having acquired a 51-per cent stake in Israel's BSG Resources for $2.5 billion, is likely to torpedo the $1.35-billion Rio Tinto-Chinalco joint venture for the $12-billion Simandou iron ore-project in Guinea (See: Brazil's Vale buys 51 per cent stake in BSG Resources for $2.5 billion).

In a securities filing today, the Rio de Janeiro-based Vale, with 2009 revenues of $28.6 billion, said that it had taken a 51-per cent stake in BSG Resources, a privately owned mining company owned by Israeli billionaire diamond merchant Beny Steinmetz.

Vale's ac quisition is likely to prove a body blow to the Anglo Australian miner Rio Tinto, which had signed a $1.35-billion non binding agreement last month with its largest shareholder, China's top aluminum producer Chinalco, to develop and operate the $12-billion Simandou iron ore-project in Guinea. (See: The story behind Rio's $1.35-billion Saimandou deal with Chinalco) 

In its filing, Vale said that by acquiring the stake in BSG Resources, it would get access to the Simandou iron ore concession, including a mine and several exploratory licenses.

The Simandou iron ore project is estimated to hold 2.25 billion tonnes of ore, and if developed, has the potential to become the world's third-largest mining area, after Australia's Pilbara and Brazil's Carajas.

It also has the potential to generate approximately $10-billion in annual revenues from the very first year of operation.