Kumba says it didn't manipulate mining right application

Kumba Iron Ore on Saturday dismissed allegations by a former government official that it was manipulating the system to gain rights to a stake in one of its mines previously held by ArcelorMittal South Africa.

Former deputy director general at the Mining Ministry, Jacinto Rocha, said Kumba had applied for the mining right before ArcelorMittal’s right expired, fuelling an ongoing dispute between Kumba and the South African unit of the world’s largest steelmaker.

Kumba, the world’s 10th-largest producer of iron ore, ended a preferential deal under which it sold ore to ArcelorMittal at a discount this year after ArcelorMittal failed to convert its mining right over a 21,4% stake in Kumba’s Sishen mine.

A prospecting right over that same stake was later awarded to Imperial Crown Trading (ICT), which Kumba, a unit of Anglo American, is contesting in court, saying the government’s decision was “fundamentally flawed”.

ArcelorMittal’s mining right was expiring on April 30 last year, and Rocha said Kumba launched its application the same day, asking officials to date it May 1, a public holiday.

Rocha, who was part of the team which later awarded the right to ICT, said Kumba did so to gain advantage over other applicants, as ICT applied for its prospecting right on May 4, the first working day after the expiry of ArcelorMittal’s right.

“Kumba ... was manipulating the administrative system to gain advantage and gratification,” Rocha, now a mining law consultant, wrote in a commentary to media on the dispute.

“A few days before ArcelorMittal would have lost its old order mining right, Kumba had already been sharpening its knife to stub ArcelorMittal in the back.
It was already in the process of pulling the rug under ArcelorMittal’s feet.”

Kumba said the former official’s allegations were “incorrect and irrelevant”.

“At no stage did SIOC [Kumba’s subsidiary] ever attempt to influence the process relating to its application for the mining right,” it said in a statement.

“At no time did SIOC ask for this application to be processed before May 1 2009. The Department of Mineral Resources has always acted on the basis that the application was properly lodged and processed as being received on May 4 2009.”

ArcelorMittal South Africa said Rocha’s comments had confirmed its belief that Kumba had acted in bad faith.

“The way in which [Kumba] secretively sought to exclude us from an agreed partnership was not what we expected from an established business partner,” it said in an emailed statement.

“Our continued effort to restore the existing and valid supply agreement, which was originally designed to ensure an integrated steel industry in South Africa, will continue unabated,” the ArcelorMittal unit said.

The company has said in the past losing its preferential pricing deal with Kumba would have an impact on South Africa’s exports, manufacturing and other parts of the steel industry.

The company is hoping to regain the long-term preferential deal, which is now in arbitration, by offering to buy ICT, but said it would cancel the acquisition should ICT’s Sishen right be revoked.

The steelmaker last month reached an interim agreement to buy ore from Kumba over the next year at about half of recent market prices until the dispute is resolved.—Reuters

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