The mining arm of Israeli billionaire Beny Steinmetz's business empire has accused the government of Guinea of seeking to "illegally seize" its assets through a probe into how it won rights to mine part of a major iron ore deposit.

Steinmetz's privately owned BSG Resources, which has been working in the West African country with Brazilian mining major Vale, confirmed it had received a letter from a government commission alleging improper behavior and graft in its winning of rights to develop blocks in the Simandou region. Steinmetz, one of Israel's richest men, is best known as a diamond miner and trader. Forbes earlier this year estimated his fortune at $5.9 billion.

The Financial Times reported yesterday that a government committee backed by philanthropist George Soros had launched a corruption probe into the award process for the blocks in 2008 and sent the letter to BSG including a range of charges. The blocks were stripped from Anglo-Australian miner Rio Tinto and the licenses passed to BSGR in 2008 under a previous administration. Simandou, in Guinea's hilly and forested southeast, is estimated to hold what could be the world's largest unexploited iron ore reserves.

"This is the fifth and most clumsy attempt by an already discredited government of Guinea in an ongoing campaign to illegally seize BSGR's assets," BSGR said in a statement. It said the letter made "ridiculous" allegations accusing BSGR of making payments and offering gifts including a diamond-encrusted gold watch to the country's last president. The company said licenses were issued "through due legal and transparent processes" and had been judged legal by an international law firm working for the government.

Reuters has not seen the letter from the government and was unable to reach Guinea officials to confirm its content, the charges made by the committee or the status of any investigations into the contracts. BSGR said the government had been in possession of all the documentation it was now requesting for a year, but that it would resubmit all requested information.

Relations between Guinea's government and mining firms operating in the resource-rich nation have been strained since the government began a review of its mining code, aiming to boost the state share in projects and reassess all of the country's resource contracts. Guinea enlisted Soros' help last year as part of a push to review the operation of the mining sector and fight corruption, saying it did not have the funds to employ commercial consultants as advisers.

BSGR, which has a track record for operating in some of Africa's toughest geographies, brought in Vale to jointly develop the Guinea blocks, but the Brazilian miner last month announced it would put the project on hold.