[miningmx.com] — STEEL producer ArcelorMittal has bought 100% of Imperial Crown Trading (ICT) for R800m in the latest twist in the saga over participation in Kumba’s Sishen iron ore mine.
ArcelorMittal CEO Nonkululeko Nyembezi-Heita commented on Tuesday that, “whilst we continue to vigorously pursue our arbitration with Kumba Iron Ore Limited, we feel our acquisition of ICT is a prudent decision based on strong commercial grounds given that vertical integration is a crucial component of ArcelorMittal South Africa’s ability to remain competitive.
The deal has been linked into a broad-based black economic empowerment transaction also announced today which will put 26% of ArcelorMittal into the hands of the Ayigobi consortium as well as 8,500 ArcelorMittal employees.
Nyembezi-Heita said the shareholders of ICT have been included, “inter alia as participants in the Ayigobi consortium’.
That consortium is led by Sandile Zungu while its participants include Oakbay Investments – which is owned by the Gupta family – and Jagdish R Parekh who is a substantial shareholder in ICT.
Zungu, the Gupta family and Parekh are all believed to be very well connected politically to the present government.
Market speculation that ArcelorMittal was considering such a move first surfaced about a fortnight ago.
Nyembezi-Heita refused to comment on this – and on what other steps the group may be looking at to recover its mineral rights in the Sishen mine – when approached by Miningmx at the presentation of ArcelorMittal’s interim results on July 28.
Asked about the speculation ArcelorMittal was considering buying a controlling stake in ICT she replied: “No comment. I cannot comment on Imperial Crown Trading at all.’
A leading JSE analyst – speaking on condition of anonymity – commented, “I think this is indicative of a desperate strategy by ArcelorMittal.
“It tells you that they have realised those mineral rights are gone and they are now trying to recover them by other means.
“I think it’s pretty negative for ArcelorMittal because you have to ask what precisely have they bought? From the look of it they have bought political expediency through a highly politically connected BEE deal.’
ICT was awarded a prospecting right by the Department of Mineral Resources (DMR) in respect of a portion of the Sishen mine following ArcelorMittal’s failure to apply to convert its old order mining rights.
Kumba has taken legal action against the DMR over its decision and has refused ICT access to the mine.
According to the review application lodged by Sishen Iron Ore Company – SIOC which is the Kumba operating subsidiary running the Sishen mine – there are fourteen grounds of appeal.
One of them is that ICT’s completed application for the rights was lodged several days after that of SIOC.
A Kumba spokesperson commented, “we are not commenting on the deal now announced between ArcelorMittal and ICT.
“Kumba will continue to pursue its legal avenues. We believe the prospecting right was incorrectly awarded to ICT by the DMR which incorrectly accepted and granted the application in which there were irregularities.
“The legal action over the iron ore supply contract with ArcelorMittal is not affected by this deal so the arbitration proceedings will also go ahead.’
Nyembezi-Heita said the deal with ICT was , “subject to certain terms and conditions including the completion of a due diligence exercise to the satisfaction of ArcelorMittal South Africa.’
The analyst commented, ” I am pretty certain that due diligence exercise is all about whether ICT actually gets the rights to the Sishen mine awarded to it or not. “
