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Thursday, December 15, 2011

S.Africa judge revokes rights awarded in Kumba case

Thu Dec 15, 2011

PRETORIA (Reuters) - A South African judge ruled on Thursday that a company with no mining experience and business links with President Jacob Zuma's son could not keep mineral prospecting rights it was awarded.

South Africa previously awarded Imperial Crown Trading the right to prospect for minerals at the Sishen mine operated by Kumba Iron Ore, a unit of global miner Anglo American.

The stakes went far beyond one commercial dispute.

ArcelorMittal South Africa had allowed the right to lapse in 2009, putting in jeopardy a lucrative multi-billion rand supply deal it had with Sishen that allowed it to source iron ore at a discount.

Judge Raymond Zondo also said he agreed with ArcelorMittal's contention that Sishen held 100 percent of the right to the operation and it was not open for anyone to apply for the lapsed right.

ArcelorMittal says this means its supply agreement remains in force.

"The judgement of the High Court serves to confirm our view that Sishen remains obliged to supply 6.25 metric million tonnes of iron ore to us at cost plus three percent in terms of our agreement," ArcelorMittal said in statement.

The group's share price rose more than 5 percent after the verdict.

Kumba disagreed that the decision had any bearing on the supply dispute, which is being fought out in a separate arbitration process.

"Kumba remains convinced that the contract lapsed and this judgment does not change that," a spokesperson for Kumba said.

Thursday's judgement was the latest twist in a long and complex saga, and ICT immediately signalled it would appeal.

"Certainly we will appeal. We do not agree with the judgement. It is contrary to what we have been contending all along," ICT lawyer Ronnie Mendelow told journalists after the ruling.

One of ICT's owners has business connections to Zuma's son, Duduzane, and the awarding of the right had rattled investor confidence in Africa's largest economy as it focused unflattering attention on the issue of crony capitalism and political favouritism.

"One of the uncertainties of the mining industry has been the security of tenure, and investment has pulled back, so if anything this judgement may encourage investment," said Chris Hart, economic strategist at Investment Solutions.

"My instinct is that policy and procedures need to follow best practice. My sense is that we are moving back to best practice and a defendable process of awarding mineral rights," he said.

The full judgement with the reasons for the decision will be given on Tuesday, and South Africa's department of mineral resources said in a statement it would not comment before then.

(sourced Reuters)

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