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Quantum matters – High-profile mining dispute in Guinea

Daniel Turner Daniel Turner

On 4 April 2019, an LCIA Tribunal awarded US$1.25 billion plus interest to Vale S.A. (Vale), a Brazilian mining company, in a claim against BSG Resources (BSGR), its joint venture (JV) partner regarding a mining project in Guinea.


Between 2006 and 2009, BSGR obtained exploration permits from the Government of Guinea for iron ore deposits in the Simandou and Zogota regions, believed to be some of the largest untapped iron ore deposits in the world. In March 2010, BSGR obtained mining concessions over the Zogota area.

In April 2010, Vale entered into a joint venture with BSGR and agreed to purchase an indirect 51% share of BSGR Guinea for US$2.5 billion, including an initial US$500 million and subsequent investment of US$2 billion into the project.

In April 2014, Guinea revoked BSGR’s mining rights following allegations of bribery by BSGR in obtaining those rights. Vale alleged that by April 2014 it had invested c.US$947 million on top of its initial US$500 million investment. During Vale’s due diligence phase, BSGR had not disclosed the existence of intermediaries for the obtention of mining rights.

On 28 April 2014, Vale (the Claimant) filed a Request for Arbitration against BSGR (the Respondent) on three alternative grounds. In March 2015, Vale exited the JV and sold its 51% stake back to BSGR for US$1.

The Tribunal found the Respondent liable for fraudulent misrepresentation. This article focuses on quantum.

Claimant’s approach

Vale aimed to be put back in the position it would have been in had it not entered into the JV. Vale claimed US$1.45 billion, ie, the expenses Vale and its subsidiaries incurred in reliance on the fraudulent representation. This included the initial consideration of US$500 million, as well as US$947 million in subsequent investments, made of:

  • US$581 million in outstanding loans from Vale International to BSGR Guinea, plus US$200 million in interest on these loans accrued at April 2014 at the contractual simple rate of 16%
  • US$85.4 million spent on a feasibility study in respect of two blocks in Simandou
  • US$80.5 million in internal costs relating to the JV’s operations outside Guinea between 2010 and 2013.

Vale provided records of wire transfers to prove payment of the initial consideration. To evidence the outstanding loans, Vale provided a spreadsheet showing the various loans made to the JV, repayments received and the calculating of interest. It also provided the underlying promissory notes.

Vale also submitted an expert report to support the last two heads of damage. The expert relied on accounting entries and supporting documents, including reports to the JV’s board of directors where other evidence had been destroyed by fire. Vale’s expert could not verify expenses for US$0.5 million.

Vale also claimed compound interest on any award.

Respondent’s approach

BSGR only partially engaged with the arbitral process. It stopped taking part in the proceedings from September 2016 onwards and did not participate in two of the hearings.

BSGR raised several objections including that Vale’s losses were not caused by BSGR’s misrepresentation and that Vale failed to mitigate its losses by not assisting BSGR in its efforts against Guinea’s expropriation and by refusing to authorise the JV to join the ICSID case.

BSGR considered that evidence provided by Vale was inadequate, and that Vale should have also provided employment contracts, timesheets, travel requisition forms and employee reports to substantiate its internal costs. It also challenged US$1.1 million in costs arguing that they were incurred by Vale International, a subsidiary of the Claimant’s, as opposed to the Claimant itself.

Tribunal’s decision

The Tribunal found that the JV agreements allowed Vale to claim for monies paid by its subsidiaries and awarded US$1.25 billion, which corresponded to what Vale claimed except:

  • loan interest of US$200 million. The Tribunal considered that damages for fraudulent representation aim to put the Claimant in the position it would have been in had the Respondent not made the representation. As a result, Vale could not rely on the contractual rate of interest and Vale should have provided evidence of the interest which the funds would have generated elsewhere had they not entered into the loan agreements with the JV
  • internal costs of US$0.5 million, which could not be substantiated by Vale’s expert.

The Tribunal awarded simple pre-award interest at a rate of LIBOR USD 3-month +7% and compound post-award interest at a rate of LIBOR USD 3-month +5%. The Tribunal chose simple pre-award interest as it considered that Vale would likely have invested the funds in its business and preferred simple interest for that reason. It awarded compound post-award interest to incentivise the Respondent to pay promptly.


This high-profile case illustrates the approach taken to calculate damages aimed at putting the Claimant in the position it would have been in had the contract not been entered into, where the loss corresponds to all expenditure incurred in reliance on the fraudulent representation. It also shows the type of documents that can be provided to substantiate amounts claimed when invoices and other primary sources are no longer available.

Case information

Claimant: Vale S.A.

Respondent: BSG Resources Limited

Case ref: LCIA Arbitration No. 142683


Professor Filip De Ly, Chairman

Sir David A.R. Williams, QC

Dr Michael Hwang, SC


  1. Vale S.A. V. BSG Resources Limited, LCIA Arbitration No. 142683, LCIA (London Court of International Arbitration)

For further information, please contact Daniel Turner. The author would like to thank Lisa Mazzucotelli for her assistance in drafting the article.

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