[miningmx.com] — KUMBA Iron Ore said on Thursday it would not enter into a government-initiated discount iron ore price deal with steel manufacturers before its legal disputes over a 21.4% prospecting right in Sishen Iron Ore were resolved.
This followed a cabinet announcement which said that the government would, through an inter-department task team (IDTT) on iron ore and steel, seek a deal that would allow ArcelorMittal and other steel producers to source 21.4% of Kumba’s ore ouput from Sishen at cost plus 3%.
This was subject to a steel pricing model.
“In essence, the IDTT will be entering into negotiations with the relevant stakeholders in the iron ore and steel industry with the objective of providing cost plus 3% access to the 21.4% Sishen mining rights.conditional upon a developmental pricing model that will result in domestic prices of steel being no higher than the lowest quartile of global prices,’ the cabinet statement said.
The government has proposed the measure to keep local steel prices competitive and to avoid larger companies using their dominance to charge excessive prices.
ArcelorMittal has for months been at loggerheads with Kumba over iron ore prices. Kumba in February terminated a long-term deal under which it sold ore to the steelmaker at a discount, after ArcelorMittal failed to convert its rights over a 21.4% stake in Kumba’s Sishen mine into a new order mining right as required by law.
Pending a resolution of the dispute, now in arbitration, the two companies have reached an interim agreement valid until the end of July next year for ArcelorMittal to source iron ore from Kumba at about half the market price.
“Numerous issues still need to be extensively discussed between the IDTT and Kumba, before any concrete proposals can be considered,’ Kumba said in response to the cabinet’s proposal.
“An appreciation of all the relevant factors involved in the entire iron ore and steel value chain is critical to these discussions. Kumba believes that it is premature in the circumstances to come to any firm conclusions as to the optimal way forward.’
Kumba added the conclusion of the arbitration process between itself and ArcelorMittal is key to provide clarity on the mutual rights and obligations of the respective parties.
“The second legal process is the pending High Court review process currently underway, in which Kumba seeks the setting aside of the 21.4% undivided prospecting rights granted to Imperial Crown Trading 289, and the granting of the residual 21.4% undivided mining rights to Kumba,’ the group said.
“The matter is currently before the High Court, and Kumba believes that this process should be completed as expeditiously as possible, in order for the court to pronounce on the rights and obligations of the respective parties, as well as the correct interpretation of the Mineral and Petroleum Resources Development Act.’
Kumba said its discussions with the IDTT were still at an early stage. Because of this, as well as the legal matters underway, it is not possible to enter into any agreement.
