Thursday, 24 Feb 2011Case study:Kumba and ArcelorMittal SA
By Charlotte Mathews
The ugly dispute over the mining rights at Sishen Iron Ore Mine has heightened investor fears that the awarding of permits in SA is neither fair nor transparent.
For historical reasons linked to the breakup of state-owned iron and steel company Iscor, Anglo American subsidiary Kumba Iron Ore holds 78,6% of the mining rights at Sishen. ArcelorMittal SA held the remaining 21,4% with an agreement that the steel giant would be supplied with 6,25Mt /year of iron ore from Sishen on cost plus 3%.
Iron ore has been a particularly lucrative business in the past few years as China urbanises and builds infrastructure. Kumba could increase its profits if it could export iron ore or sell it at market-related prices locally , instead of selling it to ArcelorMittal SA at a subsidised price.
So last April, when ArcelorMittal SA failed to renew its rights, Kumba, without telling its steel partner, applied for them . But unbeknown to both companies, Imperial Crown Trading (ICT), a new entity with links to President Jacob Zuma, also applied for the rights.
ICT was granted the prospecting right, a precursor to a mining right. But the awarding of the rights by the office of mineral resources minister Susan Shabangu is now at the centre of a bitter legal battle. Kumba is appealing the decision, alleging fraud in ICT’s application. This week Kumba and Shabangu’s department had filed affidavits, but ICT’s is still outstanding.
In a blatant attempt to regain the mining right by other means , ArcelorMittal SA has offered to buy out ICT for R800m and include the ICT shareholders and Zuma’s son, Duduzane — linked to the Gupta family and businessman Lazarus Zim — as its empowerment partners. The deal has not yet been finalised and the legal case is expected to drag on for a while.
Meanwhile, Shabangu is standing by her department’s decision. “Our responsibility is to look at the application. If it’s compliant, then we are compelled to grant a licence, not on the basis of the individuals,” she has reiterated. “It has nothing to do with being politically connected.”
Tags:China, Imperial Crown Trading, ICT shareholders, President Jacob Zuma,
For historical reasons linked to the breakup of state-owned iron and steel company Iscor, Anglo American subsidiary Kumba Iron Ore holds 78,6% of the mining rights at Sishen. ArcelorMittal SA held the remaining 21,4% with an agreement that the steel giant would be supplied with 6,25Mt /year of iron ore from Sishen on cost plus 3%.
Iron ore has been a particularly lucrative business in the past few years as China urbanises and builds infrastructure. Kumba could increase its profits if it could export iron ore or sell it at market-related prices locally , instead of selling it to ArcelorMittal SA at a subsidised price.
So last April, when ArcelorMittal SA failed to renew its rights, Kumba, without telling its steel partner, applied for them . But unbeknown to both companies, Imperial Crown Trading (ICT), a new entity with links to President Jacob Zuma, also applied for the rights.
ICT was granted the prospecting right, a precursor to a mining right. But the awarding of the rights by the office of mineral resources minister Susan Shabangu is now at the centre of a bitter legal battle. Kumba is appealing the decision, alleging fraud in ICT’s application. This week Kumba and Shabangu’s department had filed affidavits, but ICT’s is still outstanding.
In a blatant attempt to regain the mining right by other means , ArcelorMittal SA has offered to buy out ICT for R800m and include the ICT shareholders and Zuma’s son, Duduzane — linked to the Gupta family and businessman Lazarus Zim — as its empowerment partners. The deal has not yet been finalised and the legal case is expected to drag on for a while.
Meanwhile, Shabangu is standing by her department’s decision. “Our responsibility is to look at the application. If it’s compliant, then we are compelled to grant a licence, not on the basis of the individuals,” she has reiterated. “It has nothing to do with being politically connected.”
Tags:China, Imperial Crown Trading, ICT shareholders, President Jacob Zuma,
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