Kumba, Sishen battle in court

2011-08-13 14:29

The mayhem that is the dispute over Kumba Iron Ore’s Sishen mine will come to a head tomorrow when the protagonists start squaring off in the North Gauteng High Court over a 21.4% right in the world-renowned mineral asset.

When Kumba cried foul in March last year over the mineral resources department’s decision to grant the minority prospecting right to then unknown but politically connected Imperial Crown Trading 289 (ICT), it set in motion a chain of events that made the Guptas and Duduzane Zuma household names.

It instigated the overhaul of the Mineral and Petroleum Resources Development Act and was the subject of the recent unprecedented raid by the Hawks on the state attorney’s office.

The right previously belonged to ArcelorMittal SA (Amsa), which had failed to convert it to a new order right prior to the April 30 2009 deadline.

Mineral Resources Minister Susan Shabangu readily admitted that the incident delivered a hard blow to the credibility of South Africa’s mining legislation.

The fact that a mineral right over an existing operation had been awarded to a new party most concerned North American investors – even more so than nationalisation – during a roadshow Shabangu embarked on in March.

She said to Miningmx in an interview in June: “We’ve got to accept that when the original drafting of the act happened, no one thought it would be possible to lose a mining right this way.

“It was something, in my own view, which the rest of the world has never experienced.

“In terms of the application of the law as it stands, we’ve done the right thing. We can’t apply the law in a way we want.

“We’ve got to do it in terms of how it stands. But we allude to the weakness of the act; there is a gap there and it’s one of the issues we will address.”

According to court papers, Kumba, which has always had the remaining 78.6% right over Sishen, would in essence ask the court to set ICT’s prospecting right aside, alleging ICT’s submission was a (in part photocopied) replica of Kumba’s application.

The iron ore giant would also claim that, in terms of the act, it’s the only entity entitled to apply for the 21.4% prospecting and mining rights.

In an effective U-turn on an earlier decision to buy ICT and the 21.4% right it had lost, Amsa would try to prove to Judge Raymond Zondo that Kumba had converted the steel maker’s right in the Sishen mine on its behalf when Kumba renewed its 78.6% mining right in 2008.

Amsa’s view stems from its contention that the act does not allow for mineral rights to be co-owned in an undivided share structure. Essentially, Kumba couldn’t have converted its mining licence without simultaneously converting Amsa’s stake.

For its part, ICT would argue the department’s decision to award it the prospecting right was correct; that it has been the subject of dirty tactics by Kumba and should be allowed to start benefiting economically from its right in Sishen.

There are many more issues that will hinge on the outcome of Zondo’s judgment.

For one, the unrelated arbitration process on the price of ore supply from Kumba to Amsa would be decidedly settled one way or the other. Amsa wants to enforce an earlier agreement where Kumba supplies it with ore at cost plus 3%; a right Kumba said had lapsed when Amsa failed to renew its right in Sishen.

And government is hell-bent on seeking a deal that will allow all the country’s steel producers to source ore from Sishen on the terms which Amsa had previously enjoyed.

Cabinet spokesperson Jimmy Manyi said last month that an inter-departmental task team would come up with concrete proposals at the end of September, but it will be difficult to see if it can force Kumba’s hand if it was to be effectively awarded the entire mineral right by the court.

Join the conversation!

24.com encourages commentary submitted via MyNews24. Contributions of 200 words or more will be considered for publication.

We reserve editorial discretion to decide what will be published.
Read our comments policy for guidelines on contributions.

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
0 comments
Comments have been closed for this article.

Inside News24

 
/News

Book flights

Compare, Book, Fly

Traffic Alerts
There are new stories on the homepage. Click here to see them.
 
English
Afrikaans
isiZulu

Hello 

Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.


Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire 24.com network.

Settings

Location Settings

News24 allows you to edit the display of certain components based on a location. If you wish to personalise the page based on your preferences, please select a location for each component and click "Submit" in order for the changes to take affect.




Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.