UPDATE:Kumba Settles Interim Price Agreement With ArcelorMittal
22 Luglio 2010 - 9:31AM
Dow Jones News
Kumba Iron Ore Ltd. (KIO.JO) said Thursday that it settled on an
interim price agreement with ArcelorMittal South Africa Ltd.
(ACL.JO) for the delivery of iron ore while a dispute over a
contract between the two goes through arbitration.
The decision allows operations to continue as normal during the
arbitration process that is expected to last up to 18 months. The
agreement will cover the period between March 2010 and July
2011.
ArcelorMittal said as a result of the agreement it will keep
operating its Saldanha plant after threatening to close it last
week in an apparent escalation of tension between the two parties,
forcing the South African government to publicly call for a
resolution.
The two companies are locked in a dispute over a contract in
which Kumba supplied a set amount of iron ore to ArcelorMittal each
year at a price of 3% above cost of production.
Following ArcelorMittal's loss of rights to part of the Sishen
mine--jointly owned with Kumba--due to a missed government deadline
for renewing it earlier in the year, Kumba said that it wanted to
break from the contract set in 2001 and sell at market prices.
While that arbitration proceeds ArcelorMittal South Africa, a
unit of world's largest steelmaker ArcelorMittal (MT), will pay
Kumba, which is 63% owned by Anglo American PLC (AAL.LN), a fixed
price of $50 a metric ton for iron ore deliverable to its Saldanha
plant and $70/ton for inland plant deliveries.
That is up from around $30/ton that was being paid at production
cost plus 3%.
ArcelorMittal said it will continue to purchase the annual 6.25
million tons of iron ore. Additional iron ore purchases will be
paid for at the prevailing spot price.
"As a result of the conclusion of an interim agreement, we are
pleased that we will be in a position to continue the Saldanha
plant operations with the current employee complement that is in
place," said ArcelorMittal South Africa chief executive Nonkululeko
Nyembezi-Heita.
"Our current export order program will continue, but the
viability thereof will depend largely on steel prices and exchange
rate variations, which will be monitored on a continuous basis,"
she added.
-By Devon Maylie, Dow Jones Newswires; +44 (0)20 7842 9483;
devon.maylie@dowjones.com
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