One of the world's wealthiest men was dealt a blow by one of the world's poorest countries on Wednesday when an investigation by the government of Guinea concluded that a company run by billionaire Beny Steinmetz should be stripped of lucrative mining concessions because it had obtained them through corruption.

The decision is a turning point in the two-year battle between Steinmetz and the first-ever democratically-elected government of the impoverished west African country of Guinea for control of the world's riches untapped iron ore deposits.

Steinmetz had acquired the rights to a giant deposit beneath the Simandou mountains in a deal that was widely regarded as remarkable, even within the buccaneering world of African mining: his company BSG Resources (BSGR) said it had won two mining concessions as a result of a $165m (£98.5m) investment in the exploration of the area. It then sold 51% of its prize to the Brazilian mining giant Vale for $2.5bn.

However, a government committee in the Guinean capital of Conakry now says it possesses what it describes as "precise and coherent evidence" that BSGR used intermediaries to pay bribes to Mamadie Touré, the wife of Lansana Conté, the dictatorial ruler of the country until his death in 2008.

She claims to have received a series of payments totalling over $3m from BSGR representatives starting in 2006, and to have signed a contract for a further $5m in 2010. "Such corrupt practices nullify the mining titles and the mining convention," the committee said in its 33-page report.

Much of the evidence was gathered in the US by the FBI during an inquiry into the activities of Frederic Cilins, an associate of Steinmetz, and handed over to the government of Guinea.

Cilins is said to have offered further bribes to Touré, totalling $150,000, to persuade her to destroy documents that allegedly detail the corrupt payments said to have secured the mining concessions.

He was arrested in Florida after the FBI recorded a series of meetings with Touré, and faces four years in prison after pleading guilty last month to obstructing a criminal investigation. The US investigation into alleged breaches of the Foreign Corrupt Practices Act is continuing.

The committee in Conakry published some of the evidence gathered by the FBI, including transcripts of conversations recorded covertly when Cilins and Touré met at Jacksonville airport in Florida on several occasions last year. Cilins was recorded telling Touré that Steinmetz had authorised the bribes. "OK? Everything I'm telling you, it's directly from Beny," he was recorded saying.

The committee recommended that a joint venture company established by BSGR and Vale be stripped of the concessions, which will now be put out to tender. The committee said that it was likely that Vale had not been involved in corrupt practices, and recommended that it be permitted to re-tender for the iron ore concessions, but said that BSGR should be barred.

Vale has already paid over $500m to BSGR and invested further sums in the venture. The company said it had entered into the joint venture on the basis of its understanding that the concessions had been "obtained … lawfully and without any improper promises or payments".

Vale is understood to now be planning legal action against BSGR.

Guinea possesses abundant reserves of diamonds, bauxite, gold and uranium, as well as iron ore. Despite this, it is one of the world's most impoverished countries, and much of its population live without clean water, electricity or education.

Responsibility for this state of affairs has been attributed to Conté and the small number of relatives and other associates who surrounded him during the years of his rule. One Human Rights Watch report described this group as being to blame for the "criminalisation of the state".

In 2010, however, following the election of Alpha Condé as president, the government began to re-examine past mining contracts, including the deeply-controversial BSGR iron ore deal.

Steinmetz, 58, is an Israeli citizen and is said to be that country's richest businessmen, with an estimated wealth of around $6.7bn. He controls BSGR through family trusts. The company is registered in Guernsey and has offices in London and Geneva.

His business is also under investigation by Swiss authorities. Last year, following a request by the government of Guinea, Swiss police raided the Geneva offices of a company that provides management services for BSGR, and searched a private plane used by the tycoon.

Steinmetz's spokesman said BSGR denied any wrongdoing and would disprove the allegations.

"The Guinean government is relying on fabricated claims, compromised witnesses and illegitimate processes," he said. He also alleged that the concessions had been acquired lawfully and were being taken away in order to reward the government's political allies, a claim that the government of Guinea denies.

In the past, Steinmetz has claimed that the allegations against him are rooted in envy at his success. He is widely expected to attempt to recover the rights to the Simandou deposit by bringing proceedings in an international court of arbitration.

There was no immediate comment from his spokesman about the transcript of the FBI recording in which Cilins claimed that Steinmetz had authorised the payment of bribes.

Beny Steinmetz: losing his sparkle?



According to the official website of Beny Steinmetz, the Israeli diamond, finance and property tycoon, the expression "the sky's the limit" could never be applied to his business ambitions.

"To him," the website says, "the sky is only the beginning." Given the nature of his ambition, it is perhaps not surprising that when he decided to branch out into African iron ore mining, he struck not just a deal, but the deal – "the jackpot" in the words of one industry observer.

The deal in which Steinmetz acquired an iron ore concession in Guinea, west Africa, that was worth at least $5bn, through an investment of $165m, is coming back to haunt him.

One corruption probe in Guinea has resulted in him being stripped of the iron ore concession, while a second, conducted by the FBI, is grinding on in the US. Steinmetz was born in April 1956 in Netanya, Israel, the fourth child of Rubin Steinmetz, who had established a successful family diamond trading business.

After completing his military service, he left for Belgium at the age of 21 to work for a leading diamond dealer. Later he joined forces with his brother, Daniel, to create Steinmetz Diamonds Group and subsequently the Beny Steinmetz Group. Today, estimates of his wealth vary from $4bn to $6.7bn.

Steinmetz holds a French passport along with his Israeli citizenship and described himself as an "international Israeli". He divides his time between Israel, Geneva and the south of France.

He and his wife Agnes met as teenagers and have four children.

Ian Cobain