Sishen saga (almost) over

2013-12-15 10:50

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Will there be another twist in this drawn-out battle for a stake in one of earth’s most valuable pieces of land?

There is room for one more twist in the five-year saga around the Sishen iron ore mine.

Anglo American unit Kumba Iron Ore walked out of the Constitutional Court this week with what looks like a final victory in its battle to control Sishen, one of the most valuable pieces of land on earth.

The mineral resources department was ordered to let Kumba exclusively reapply for a disputed 21.4% stake in the Sishen mining right within three months.

But the department could technically find a reason to reject the application – or set new conditions before granting it.

Kumba’s contender for the disputed 21.4%, Imperial Crown Trading (ICT), was saddled with a huge legal bill after the Constitutional Court rejected its submissions and ordered it to pay half of Kumba’s legal costs – no small matter in a complicated case where everyone involved roped in top advocates.

ICT’s lawyer, Ronnie Mendelow, issued a statement on Friday strongly implying that the battle is not quite over.

The department could have grounds to refuse Kumba’s new application on the basis of previous accusations of breaching environmental regulations, said Mendelow.

He also hit out at Anglo chief executive Mark Cutifani, who this week welcomed the judgment as a victory for “legitimate” mining companies, implying doubts over ICT’s legitimacy.

ICT then threatened to take all media houses reporting that it is “politically connected” to the press ombudsman, saying that ICT will “continue to strive to enhance transformation in the mining industry”.

Kumba spokesperson Gert Schoeman said the company would prefer not to speculate on any conditions that the department may or may not impose and that it was submitting a new mining rights application to comply with the court order.

The Sishen saga has seen one of South Africa’s most high-stakes corporate scandals – involving allegations of fraud, Hawks raids on government offices, bitter wrangling between two of the country’s largest companies and a widely condemned BEE deal that would have handed several billion rands to a consortium including President Jacob Zuma’s friends, the Guptas; and Zuma’s son Duduzane.

ArcelorMittal SA (Amsa), which joined the case looking for an outcome that might resuscitate an old cost-price iron ore deal with Kumba, was slapped with an even larger cost order – paying 50% of both Kumba and the state’s costs.

The department took the case to the Constitutional Court after trying, and failing, to defend, giving the stake to ICT in 2009 in both the High Court and Supreme Court of Appeal.

Dikgang Moseneke, acting chief justice, wrote in the judgment that the state and Kumba “have both been partially successful” in the case.

The department had argued that Kumba’s victories in the lower courts created a “precedent that constrains the state in all comparable situations” and that the effect is that newcomers would “hardly ever” benefit from the transformative agenda of mining law.

But Moseneke declared the Sishen case so unique that it creates no precedent whatsoever.

Not even the department, “which should know”, could point out a single other case like the Sishen one, wrote Moseneke.

Sishen was a unique case in the transition period to a new mining law between 2004 and 2009 because there were two old order mining rights to a single ore body.

This did not sit well with the new law, which doesn’t allow divided mining rights. Every party involved drew a different, self-serving, conclusion about what should happen to the Sishen mining right, but it turns out Kumba got it more or less right.

Moseneke added: “It is not facile to conclude that this case is unlikely to establish a precedent for other, similar cases.”

No one else could have applied for the other 21.4% after Amsa let it’s old order right expire, according to the Constitutional Court.

It would be “practically untenable” to give a newcomer a separate mining right to Sishen, wrote Moseneke. “The [new Mineral and Petroleum Resources Development Act] simply does not contemplate two right holders in respect of the same mineral and land. It is difficult to visualise

how a third party, who holds an undivided share of 21.4%, will go about implementing its mining?...?alongside Sishen’s mining?...?or its social and labour plan, or its already approved environmental management programme.”

Kumba can apply for and receive the 21.4% “subject to whatever conditions the minister deems appropriate”, according to Moseneke.

He said: “For instance, the conditions may adequately deal with the concerns raised by the director-general, particularly in relation to the possible detrimental effect a monopoly by Sishen could have on the local steel market’s access to Sishen’s output.”


It all began on April 30 2009, when the transition period between South Africa’s old and new mining law regimes ended.

Amsa’s 24.1% share in Sishen then expired, and both Kumba and ICT applied for rights to it on the same day. The mineral resources department granted ICT’s application despite Kumba already mining the ore body in question.

Kumba successfully challenged that decision in the North Gauteng High Court, kicking off the legal battle that ended in the Constitutional Court this week.

But Kumba has also launched a civil case against ICT and the department, alleging fraud, among other things.

The allegation was that ICT, which is half-owned by Phemelo Sehunelo, a former municipal manager of Kimberley, somehow got hold of Kumba’s application and simply photocopied part of it to lodge its own application.

As soon as ICT emerged with the right, Amsa offered to buy the company for R800?million and put together a controversial BEE deal with people tied

to ICT worth more than R9?billion.

The Gupta family and Duduzane Zuma would have been among the beneficiaries, along with most ICT shareholders. ICT was not itself included in the BEE consortium, but its shareholders were.

Amid a public outcry and Kumba’s challenges to the ICT rights, the BEE deal was later dropped.

Mendelow, who represents ICT, on Friday hit out against the description of the company as “politically connected” due to its association with Zuma and the Guptas throughout the BEE deal, and having Prudence Mtshali, who is romantically linked to deputy president Kgalema Motlanthe, as a shareholder.

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