[miningmx.com] — WHILE three dogs are fighting over a bone, a fourth may run off with it.
What’s becoming clear from recent events is that since February much effort has been going into the establishment of a new South African steel producer, after a dispute erupted over mineral rights at Kumba’s Sishen iron ore mine.
Prior to this, ArcelorMittal South Africa (Amsa) had received 6.25 million tonnes of iron ore a year from this mine – one of the world’s biggest and most valuable iron ore sources at Kathu in the Northern Cape – at a price of cost plus 3%.
Last week Lazarus Zim stepped down as Kumba chairperson, saying he was resigning because he had been involved in the formation of a new steel giant in South Africa.
The new company is a potential client of Kumba, he said.
Zim declined to name his partners, saying details about the company would be announced early next year. He did however stress that it was a major project.
His words were barely cold when an announcement came from New Delhi, India, which may allude to the reasons behind Zim’s resignation.
On Tuesday morning Predeep Kumar Misra, a secretary in the Indian steel ministry, announced he had paid South Africa a visit last week, together with the state-controlled Steel Authority of India (Sail), India’s second-largest steel producer which produces about 13.5 million tonnes of steel a year.
The Indian delegation certainly wasn’t here to watch cricket.
Sail is considering building a steel factory in South Africa to produce 3 million to 5 million tonnes of steel a year, said Misra – a huge plant able to meet at least half of South Africa’s domestic demand.
Sail is now holding talks with the South African government about the procurement of iron ore and coking coal for such a plant.
In an interview with Bloomberg, Misra said the South African government had proposed a joint venture with Sail, and had promised it iron ore as well as access to coking-coal mines.
The Indian ministry is looking into the plan.
Sail’s chairperson, CS Vermahad, accompanied Misra to South Africa – just at the time that Zim was resigning from the Kumba board.
Steel production requires three basic materials: iron ore, manganese and metallurgical coal or coke.
India’s steel companies are struggling to meet the demands of their domestic market.
Sail owns enough iron ore mines to meet current demand, but in India it depends on imports for its coking coal to fuel the steel furnaces.
Over the past year, the price of coking coal has risen almost 80% because of global shortages and shipping delays.
Over the next two years, India anticipates a rise in its steel production of over 60% to 120 million tonnes a year.
South Africa owns small amounts of coal of this quality – for example at Exxaro’s Tshikondeni Mine in Limpopo. The Coal of Africa (CoAL) Vele Mine and future Makhado Mine will also produce this quality of coal. Firestone Energy, an Australian company which is developing a coal mine in the Waterberg in partnership with Sekoko, will also produce metallurgical coal from part of its new mine.
On Tuesday, Sekoko chief executive Tim Tibeila said he had been approached by people representing Indian companies wanting to do a deal, but exactly what their proposals involved was still unknown.
India’s steel ministry is apparently also having talks to gain access to South African manganese mines. The country’s biggest manganese producer, Manganese Ore India Limited (Moil), is struggling to meet the strong demand for the metal. Moil and NMDC, a state-controlled exploration company, were making overtures to South African manganese mines, said Dalip Singh, another senior official in the steel ministry.
It therefore appears that Sail would produce for the South African market, but at the same time export metallurgical coal and manganese for steel production in India.
All of this may be the work of an interdepartmental task group commissioned to investigate SA’s steel industry, following the crisis that arose in February this year when it became known that Amsa had lost its 21.4% mineral rights in Sishen.
A cabinet report released in November said this task group would have negotiations with players in the steel industry to give Amsa or other steel producers access to these rights at cost price, subject to a steel development price model to be determined by the state.
The government is unhappy about Amsa’s steel prices in the domestic market.
All of this is happening while Kumba, Amsa and Imperial Crown Trading (ICT) are disputing the Sishen right.
Zim’s resignation and Sail’s announcement in New Delhi may indicate a new contender for the 6.25 million tonnes of iron ore at the centre of the Sishen dispute.
It’s an interesting legal question as to whether government can award the 6.25 million tonnes to another producer, but Kumba may be willing to deliver the ore on the same conditions as before to whoever will use it to the benefit of South African steel producers.
– Sake24
