UPDATE: ArcelorMittal S Africa To Buy Holder Of Sishen Rights
10 Agosto 2010 - 9:02PM
Dow Jones News
ArcelorMittal South Africa Ltd (ACL.JO) Tuesday said it has
agreed to acquire Imperial Crown Trading in a bid to reclaim rights
to a 21.4% stake in the Sishen iron ore mine that it had lost.
The steel maker plans to acquire ICT through its wholly owned
subsidiary OPCO, for ZAR800 million ($111 million) in cash, subject
to due diligence and ICT's ability to convert prospecting rights
over Sishen into mining rights, Nonkululeko Nyembezi-Heita, chief
executive of ArcelorMittal South Africa said.
Kumba Iron Ore Ltd (KIO.JO), the majority owner and operator of
the Sishen mine, has initiated a court review of the government's
decision to award those prospecting rights to ICT instead of Kumba
even though both had applied for those rights on the same day in
May of last year.
ArcelorMittal South Africa, majority owned by the world's
largest steel maker ArcelorMittal (MT), previously owned mineral
rights to 21.4% of the Sishen mine but didn't convert them to
rights that conform with new legislation, thereby creating a window
of opportunity for ICT to lay claim and win prospecting rights over
that portion of the Sishen mine.
"It is what it is," said Nonkululeko Nyembezi-Heita, chief
executive of ArcelorMittal South Africa.
"We can't wish it away," she added, noting that the company
doesn't have much of an option but to buy ICT if it wishes to
reclaim its rights over the mine.
"ICT was there and not out of any choice made by ArcelorMittal,"
she said.
Nyembezi-Heita said the decision to purchase ICT doesn't affect
the interim pricing arrangement that currently exists between the
steelmaker and Kumba nor does it affect the arbitration process
that is taking place over Kumba's decision to cancel a long-term
supply contract with ArcelorMittal South Africa.
Kumba, a unit of Anglo American PLC (AAL.LN), in March canceled
a long-running pact under which it supplied iron ore from its
primary mine, Sishen, to ArcelorMittal at 3% above costs. Kumba
cancelled the contract in March on grounds that the steelmaker
failed to convert its old rights in the mine to new mining
rights.
Nyembezi-Heita hinted that should ICT succeed in converting its
prospecting right into a mining right, then ArcelorMittal would
have access to more iron ore than through its long-term Sishen iron
ore contract with Kumba. Under the long-term contract,
ArcelorMittal has rights to 6.25 million metric tons of Sishen iron
ore annually although 21.4% of Sishen's current annual production
of 40 million tons would equate to about 8.56 million tons.
Sishen supplies about two-thirds of ArcelorMittal's iron ore
each year.
Nyembezi-Heita said purchasing ICT simplifies the company's
ability to arrive at a solution with Kumba by reducing the number
of parties involved in the dispute.
"It's an attempt to restore status quo with regard to Sishen.
And assuming that it does," it allows us to arrive at a long-term
solution, the CEO said.
Nyembezi-Heita added that the company would not pay for ICT's
legal fees as it seeks to defend its prospecting rights in
court.
Kumba requested a court review in May on grounds that ICT's
application had irregularities and reaffirmed Tuesday that it will
continue pursue legal means for what is rightly owed to the
company.
"Kumba believes that it is the only company which should be
granted these rights," a Kumba spokesperson said in an emailed
statement.
-By Alex MacDonald, Dow Jones Newswires; 44 20 7842 9328;
alex.macdonald@dowjones.com
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