[miningmx.com] — THE department of mineral resources (DMR) has defended an affidavit tabled on Thursday, which reportedly states Kumba Iron Ore has to sell heavily discounted iron ore to Imperial Crown Trading (ICT).
Business Day newspaper on Friday quoted Sandile Nogxina, DMR director general, as saying Kumba must negotiate a mining and supply arrangement with ICT – which was awarded the prospecting right and already applied for the mining right – similar to the one the miner held with ArcelorMittal SA (Amsa).
In terms of that arrangement Kumba, through its subsidiary Sishen Iron Ore Company (SIOC), sold iron ore at cost plus an additional 3% to Amsa. Kumba is arguing through an arbitration process to have this arrangement dissolved after Amsa last year failed to renew its mining rights over SIOC’s property.
Last year, the DMR granted a prospecting right to ICT over 21% of SIOC’s property, the stake Amsa allowed to lapse. In December, the DMR accepted ICT’s right to apply for the mining right over the stake. It has to make a decision on the issue within six months.
Nogxina’s comments were contained in an answering affidavit by the DMR, after SIOC lodged an application with the North Gauteng Court to set aside the award of a prospecting right to ICT.
In the application, SIOC said it was not valid to award a prospecting right to ICT if there was no practical way of executing it; in order words, ICT would not have the means to mine on land already mined by SIOC.
“The answering affidavit simply states that there is the ability for ICT and SIOC to coexist if iron ore is supplied to ICT on a cost plus 3% basis,’ a senior government official told Miningmx on condition of anonymity, as the matter was sub judice.
“This does not mean the DMR is partial to anyone; it’s simply a matter of having the two companies coexist,’ he said.
Asked what role ICT would take up in such an arrangement, the source responded: “That’s a function of the arrangement between the parties. As government, we would like to see it (the iron ore} beneficiated in South Africa’.
He said: “The South African government would like to create a number of steel companies in South Africa. We are an economy consuming lots of steel. Its untenable that we are importing it at high prices.
“So we would like to keep to the original spirit of the iron ore arrangement, whereby iron ore is provided at discounted prices.’
This view backs a cabinet statement issued in November, which stated government is looking for a deal that would allow steel producers to source iron ore from Sishen at a cost plus 3% price, subject to a steel pricing model.
“(The proposed deal is) conditional upon a developmental pricing model – determined by government – that will result in domestic prices of steel being no higher than the lowest quartile of global prices,” read the statement.
