South Africa’s Kumba Iron Ore has started legal action against Senegal after the government ordered it to stop exploration at a key mine into which Arcelor-Mittal wants to invest $2,2-billion.
Kumba, Africa’s biggest iron ore producer, exercised an option to acquire a controlling stake in the Faleme project some time ago, but Senegal put this interest in dispute in 2005.
The world’s biggest steelmaker Arcelor Mittal has since said it will invest $2,2-billion to develop iron ore mining in Senegal in the poor West African country’s biggest single investment yet.
Kumba said in a statement on Wednesday it had been ordered to withdraw from the area in Senegal where it was conducting exploration after the government agreed a separate deal with a third party.
”The government’s conduct violates Kumba’s contractual rights and accordingly Kumba has instituted summary proceedings in Senegal and will continue to enforce its rights by all legal means … including by way of international arbitration,” Kumba said.
A source close to Arcelor-Mittal said earlier this month the company had agreed to pay Senegal a 5% royalty for the Faleme projects, well above the 3% stipulated in the country’s mining code.
Faleme is the latest in a series of mining deals in West Africa as booming demand for metals from fast-growing Asian economies, including China, fuels interest in the region’s minerals.
Shares in Kumba were unchanged at R147,99 by 7.18am GMT, versus a marginally weaker Johannesburg Top-40 index of blue-chip stocks. – Reuters