Guinea to announce cancellation of BSGR, Vale of mining permits

* Report says BSGR obtained mining rights through corruption

* Recommends BSGR and Vale be stripped of concessions

* Cancellation due to be announced on Thursday (Releads with plans to announce cancellation, adds company comments, details)

By Saliou Samb

CONAKRY, April 17 (Reuters) - Guinea will announce the cancellation on Thursday of two iron ore concessions held by BSG Resources (BSGR) and its joint venture partner, Brazilian mining giant Vale, a senior government source said.

A technical committee charged with reviewing the West African nation's mining deals released a report last week accusing BSGR, the mining branch of Israeli billionaire Beny Steinmetz's conglomerate, of obtaining the rights through corruption.

The committee's report recommended that Guinea withdraw the mining permit held by VBG, the joint venture between BSGR and Vale, in the giant Simandou iron ore deposit and cancel its Zogota mining concession.

"The cabinet has approved the technical committee's recommendations," the source, who asked not to be named, told Reuters following a cabinet meeting on Thursday.

"The government wished to remain loyal to its principles of transparency to the end," said the source, adding that the presidential decree ordering the withdrawal of the concessions would be announced on Thursday evening.

BSGR has denied the allegations contained in the committee's report and said it would seek international arbitration.

"BSGR obtained the mining rights lawfully and will mount a vigorous effort to overturn this decision, which is as predictable as it is unlawful," BSGR said in a statement sent to Reuters.

Officials for Vale, the majority shareholder in the VBG venture, were not immediately available for comment.

Vale, the world's largest iron ore producer, did not participate in the corrupt practices, the report found, as it was not involved in acquiring the licences.

While the committee called for the government to exclude VBG from any future process to re-allocate the licences, Vale may be able to bid for the permits on its own.

According to a source close to the Brazilian miner, the company had spent more than $1 billion on its Guinean venture when it put the project on hold at the end of 2012. (Additional reporting by Silvia Antonioli in London and Jeb Blount in Rio de Janeiro; Writing by David Lewis and Joe Bavier; Editing by Daniel Flynn and David Evans)