Kumba ‘to offer olive branch’ if it wins dispute
Tuesday, 27 July 2010
Kumba Iron Ore has offered a conditional olive branch to the government and to stakeholders in the iron ore saga, saying it could consider "value sharing" if it wins its arbitration with ArcelorMittal and its legal dispute with Imperial Crown Trading.
The offer comes amid optimism on the fraught issue following an interim pricing agreement between ArcelorMittal and Kumba last week.
The parties have agreed to discuss the matter further this week, although the timing of, and the agenda for, this meeting are not yet clear.
Trade and Industry Minister Rob Davies broached the possibility of a wider solution last week, possibly also involving Kumba’s dispute with Imperial Crown Trading over the mineral rights to its Sishen mine.
In its official statement last week, the Department of Trade and Industry said it intended engaging with Kumba and ArcelorMittal "to ensure that the settlement does not have a negative impact on the steel price in the short run and that in the long run the rents arising from SA’s mineral resources are used to develop the economy".
Mr Davies has previously expressed concern about the "developmental issues" involved in the dispute, which led to the unwinding of a decade-old agreement that Kumba would supply ore to ArcelorMittal at a heavily discounted price on condition that it produced discounted steel -- an agreement that Mittal is accused of not honouring.
A Kumba spokesman said: "The interim price agreement between Kumba and Amsa ( ArcelorMittal SA ) was not linked to any conditions regarding government intervention on the mineral rights. The mineral rights issue and Amsa are no longer related as the previous agreement has lapsed.
"If Kumba wins the arbitration and also rightfully receives the mineral rights, we could consider value sharing."
Although committing itself conditionally to "value sharing", Kumba did not specify who this value might be shared with, but it is understood it would be unlikely to be with Imperial Crown Trading, which it considers to have obtained residual mineral rights to its Sishen mine "improperly".
Kumba’s offer of "value sharing" is conditional because if the miner were to lose its mediation case against Mittal, or fail to reverse the decision of the Department of Mineral Resources to grant prospecting rights to politically connected Imperial Crown Trading, "there would be nothing to share", one observer pointed out.
The notion of "value sharing" may only come into play after the mineral rights court case and the arbitration hearings have ended, which could take two years or more.
It is precisely this extended and potentially embarrassing legal wrangle that Mr Davies was trying to avoid, and which may be the subject of the discussions this week.
Newspaper articles speculated as much at the weekend, suggesting the government was poised to intervene in the saga. Business Times reported Mr Davies as saying: "The principle we’re putting out is this: a proportion of the iron-ore output of Sishen should be sold at a price that enables competitive steel production downstream."
It is also speculated that as part of the bargaining process, Kumba may accept a lower price for its iron ore in exchange for being granted full rights to exploit the Sishen mine.
This solution could appeal to Economic Development Minister Ebrahim Patel, who also attended the meeting last week. It could also spare Mineral Resources Minister Susan Shabangu , the third minister involved in the discussions last week, an extended legal saga, although observers noted that the discussions were at an early stage.
