The ugly dispute over the mining rights at Sishen Iron Ore Mine has heightened investor fears

Thursday, 24 Feb 2011

Case 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,

Coal of Africa inadvertently fallen into the gap between SA’s mining legislation & environmental laws

Thursday, 24 Feb 2011
By Charlotte Mathews

Case study: Vele coal mine

Coal of Africa, an Australia-listed coal mining company with a secondary listing on the JSE, has inadvertently fallen into the gap between SA’s mining legislation and environmental laws. It is proving to be a costly affair.

The company applied for a mining licence for its Vele coking coal mine in Limpopo two years ago, which it received last March after preparatory site work had already been done. Coking coal, used in making metals like steel and ferrochrome, is uncommon in SA and fetches premium prices.

However, the mine is in the vicinity of Mapungubwe, a site of considerable archaeological and cultural significance. It is also within the buffer area for the proposed Transfrontier Conservation Area, which plans to combine conservation properties within SA, Zimbabwe and Botswana. Though it is not actually within either of these declared areas, concerned groups fear that the visibility, effluents and logistics of an open-cast coal mine will severely affect the sensitive sites, and they have raised strong protests.


Work on the mine was suspended late last year, with R525m already spent, while Coal of Africa addressed concerns raised by Mpumalanga’s department of environmental affairs.

The Save Mapungubwe Coalition, which includes environmental, tourism and heritage groups, has applied for an interdict to stop work on the mine altogether.

Coal of Africa says it is committed to complying with current and any future legislation. By end-January it had submitted the necessary rectification papers under the National Environmental Management Act and had also hosted Unesco representatives and senior officials from the departments of mineral resources and environmental affairs .

Once it receives the go-ahead, it will take another three months to complete the mine.

First production of coking coal will follow shortly afterwards, it says.

Amid the controversy, Coal of Africa’s share price plunged from R17,60 on the JSE last April to a low of R7,69 in November. It has since recovered to around R10,50 — a level that will inhibit its ability to raise equity capital to develop other mines in SA.

Tags:steel mills, ferrochrome, raw material,Vele coking coal mine, Limpopo,open cast coal mine, strong protests, The Save Mapungubwe Coalition, interdict to stop work