[miningmx.com] — IT’S becoming increasingly clear that the battle over Sishen Iron Ore is a clash between elephants that won’t be over soon.
The “elephants’ are government and Anglo American, which is the country’s biggest company.
Yes, BHP Billiton is considerably larger than Anglo, but Anglo’s South African operations surpass Billiton’s. Anglo’s South African assets – consisting of platinum, iron ore, coal and manganese – are also strategically more important.
The court papers that government, in the persona of advocate Sandile Nogxina, the Director-General of Mineral Resources, handed in to the High Court in Pretoria last week, leave no doubt: there is no question of a settlement being reached in this nasty dispute.
The statement by Nogxina and his supporting officials, Jacinto Rocha, former deputy director-general, and Pieter Swart, head of the department’s provincial office in Kimberley – where the controversial mineral right applications of Kumba and Imperial Crown Trading 289 (ICT) were handled -, provides few answers to the documentary evidence of forgery in ICT’s application submitted to the court by Kumba.
Without prejudging the possible findings of the court, one could expect that Nogxina’s explanation that ICT couldn’t gain access to Kumba’s application because the provincial offices were closed for the weekend, would not convince the judge that no forgery or fraud had taken place in ICT’s application.
It would therefore appear that in its answering affidavits ICT would present the court with a defence to Kumba’s documentary evidence.
But suppose the judge decided in favour of Kumba that the awarding of mineral rights to ICT in Kumba’s Sishen mine had been invalid, what would happen to the mineral rights to 21.4% of Sishen that had belonged to ArcelorMittal South Africa (Amsa) until the end of April 2009?
Kumba had applied for the mining rights to the 21.4% and the Department of Mineral Resources had refused the application.
According to Nogxina, this meant that Kumba’s court application was of academic interest, inter alia because Kumba had in any event prevented ICT from exercising the prospecting right awarded to it and because ICT had since applied to have the prospecting right converted to a mineral right.
Unless circumstances had changed considerably, Nogxina said that Kumba could hardly again apply for the mining rights.
The reasons for the denial of these rights to Kumba were very flimsy: Kumba’s application had been submitted on April 30 2009 – a day before the rights expired. This had been done because the following day, the day on which the rights would expire, was a public holiday.
The real reasons for refusing the rights were probably rather to be found in Nogxina’s long account of circumstances in which the application had been judged: that Kumba was a very wealthy company and, according to Nogxina, the biggest single contributor to Anglo’s profits; that there was already a large degree of concentration of iron-ore production in South Africa; and that new players should be welcomed.
These may be valid points, but they don’t have legal standing. But they do clearly display government’s attitude to Kumba and Anglo.
In reality there is nothing that prohibits Kumba from again applying for the rights, but what are its chances of succeeding with a second application in the light of government’s attitude?
Kumba’s board of directors will therefore have to think deeply to find answers to a very difficult question: is it worth winning a battle with government in the courtroom, but losing a dispute with it in the long run?
Many South African mining companies have patiently tried to follow this approach, but without success. Perhaps it would be short-sighted to think that government might change its attitude towards Anglo and Kumba if they did not continue the court action.
Kumba bought Sishen with a contract that stipulated that it should deliver 6.25m tons of iron ore a year to Amsa at cost-plus-3%.
The mineral rights to 21.4% of Sishen, which were linked to the contract and which belonged to Amsa, expired.
This did not mean that Kumba’s obligation to deliver the iron ore had lapsed – only that the owner of the ore was a different party.
That different party was government, and now government is trying to transfer this ore to ICT.
Kumba’s alternative to court action is to start negotiating with ICT. This would probably result in ICT’s receiving its mining rights to 21.4% of Sishen.
In turn, this would mean that Amsa would again receive ore from Sishen at cost-plus-3%, because ICT would be taken over by Amsa as soon as the prospecting right was converted into a mining right.
This is bare-faced corruption in full view of the whole country. It would appear to have happened at other mines and will probably happen again.
It would therefore be better for the country for Kumba to dig its heels in and press on with the court action. This will teach government the principle of the rule of law.
According to Manus Booysen, the co-principal of Webber Wentzel Attorneys’ mining and resources practice, the time has come to fight outrages such as these in the courts and not, for the sake of relations with government, to sweep them under the carpet with a settlement.
