Kumba, ArcelorMittal choose arbitration

This comes after the Supreme Court of Appeal late last month confirmed a North Gauteng High Court ruling of December 2011 that Kumba subsidiary Sishen Iron Ore Mining Company had applied for, and was granted, a 100% new-order mining right.

"The two parties will finalise their documentation and a date that suits the arbitrators will be set," a Kumba spokesperson told Business Day yesterday (4 April).

The mining company said nothing had changed since the court decision with regard to heads of argument and timing of the arbitration.

"The arbitration was put on hold until the finalisation of the court process, so it has not started. It can now go ahead and will probably start in the last quarter of the year, but no date has been set as yet," the spokesperson said.

Kumba said the court's ruling favoured its argument over the legality of the iron-ore supply contract. The group in 2010 suspended its agreement to supply ArcelorMittal SA with an annual 6.25m tons of iron ore at cost plus 3% after the steel-maker allowed a partial mining right in Kumba's Sishen mine to lapse. Kumba had earlier said ArcelorMittal SA could have converted its rights, but had failed to do so.

Iron-ore supplies have since been covered by a series of interim agreements, the latest of which has still been at discounted rates, but at significantly higher prices than cost plus 3%.

The latest deal was brokered after the intervention of Trade and Industry Minister Rob Davies. Final arbitration over the supply contract can now proceed following the appeal court ruling.

ArcelorMittal SA spokesman Themba Hlengani said that nothing had changed in terms of the arbitration process since the court's decision.

"We believe that the contract remains valid," he said.

The appeal court, in confirming that Sishen Iron Ore has been granted a 100% new-order mining right, dismissed the appeals of the Department of Mineral Resources and politically connected Imperial Crown Trading, which had earlier been granted ArcelorMittal SA's partial mineral right by the department. This had led to legal challenges, including criminal charges and to the arbitration process over iron-ore supplies.

Kumba last week said the court held that Sishen Iron Ore had filed its application for conversion of its old-order right in 2005.

"The court held that the Department of Mineral Resources granted to Sishen Iron Ore the exclusive mining right in 2008. The court further held ArcelorMittal SA retained the right to lodge its old-order right (21.4% undivided share) for conversion before midnight on 30 April 2009, but failed to do so.

"As a matter of law and as at midnight on 30 April 2009, Sishen Iron Ore became the sole holder of the mining right to iron ore in respect of the Sishen mine, after ArcelorMittal SA failed to convert its undivided share of the old-order mining right. This means Sishen Iron Ore has the exclusive right to mine iron ore at the Sishen mine," Kumba said.

The company pointed out that as a further consequence of the finding, the court upheld the high court ruling setting aside the prospecting right granted by the department to Imperial Crown Trading.

Kumba had earlier insisted it had only converted 78.6% of its old-order mining right and that with ArcelorMittal SA not having converted its 21.4% undivided right, it was entitled to cancel its supply deal with the steel maker.

In the 2011 high court ruling, Justice Raymond Zondo said the case was strange not only because Sishen Iron Ore had not admitted it had a 100% mining right, it actually opposed an application brought by ArcelorMittal SA for an order declaring that it now had the sole and exclusive 100% mining right to the iron ore.

ArcelorMittal SA had argued it could not apply for conversion of its partial right as a full 100% new-order right had been awarded in 2008 to Sishen Iron Ore.

Source: Business Day via I-Net Bridge