BEE still a priority for Arcelor

2011-09-27 10:49

Steel producer ArcelorMittal SA was still interested in an empowerment deal after a controversial black empowerment transaction with Imperial Crown Trading fell through, according to a report today.

ArcelorMittal SA announced last August that one of its subsidiaries would buy Imperial for R800 million, as long as Imperial was awarded mining rights for the portion it held in the Sishen mine in the Northern Cape – one of the world’s largest and richest iron ore mines.

At the time, it was also announced that Imperial shareholders would be included in a black economic empowerment deal with ArcelorMittal.

Shareholders in Imperial include President Jacob Zuma’s son Duduzane and Atul Gupta. The Gupta family has close links to the ANC.

Yesterday, ArcelorMittal SA said the BEE deal had been cancelled.

“Shareholders are advised that the parties involved in the BEE transaction have not agreed on an extension for the satisfaction of the conditions precedent and that the subscription and shareholders’ agreement has therefore lapsed,” it said.

ArcelorMittal spokesperson Themba Hlengani told Bloomberg that empowerment “remains a priority for us as a company”.
He was not immediately available today to explain further as he was in a meeting until 3pm.

In February this year, on the release of the company’s yeearly results, ArcelorMittal SA chief executive Nonkululeko Nyembezi-Heita said discussions about the BEE deal with Imperial may have been “premature”.

Shareholders had expressed “various reservations and criticisms” about the deal, and these would be taken into account, she said.

The deal was also conditional on legal battles over its stake in the Sishen mine being resolved in Imperial’s favour.

The proposed transaction was announced after ArcelorMittal did not renew its 21.4% old order mining right in the Sishen mine, into a new order mining right by the deadline last year.

Sishen Iron Ore Company, a subsidiary of Kumba Iron Ore Limited, which owns the rest of the rights in the Sishen mine, applied for the 21.4% stake.

Imperial however also applied for the right, and was granted it. This led to a court battle involving Kumba, Imperial and the mineral resources department.

In 2001, as part of Iscor’s unbundling, it was agreed that a 21.4% stake in mineral rights of the Sishen mine would vest in the company that is now ArcelorMittal SA.

At the time it was agreed that Sishen would supply ArcelorMittal SA with iron ore, at up to 6.25 million tons a year, at cost plus 3%.

When ArcelorMittal SA failed to renew its 21.4% stake in part of the Sishen mine, Kumba said it would sell its iron ore to the steel giant at market prices.

ArcelorMittal objected, and this was the subject of arbitration.

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