Kumba cancels ArcelorMittal iron-ore deal, Minister Davies seeking urgent meetings with Kumba, Mittal and Anglo American

At the time of going to press, bombshell announcements had been made by both the high-flying JSE-listed Kumba Iron Ore and local steel producer ArcelorMittal that the nine-year-old cost-plus-3% deal between the two had been cancelled.

Mittal expects to be so hard hit that it has asked for its shares to be suspended on the JSE until March 3. Kumba has indicated that the cancellation will take effect from March 1.

Mittal has rejected Kumba's repudiation of the agreement, which emerged at the unbundling of the old Iscor into a separate mining company - Kumba - and a separate steel company, Mittal.

Urgent legal proceedings were being prepared at the time of going to press to enforce the old agreement "if the appropriate undertakings are not received from Sishen Iron Ore Mining Company (SIOC)", the Kumba-associated company.

Kumba said that Mittal's ownership of a 21,4% undivided share of the mineral rights to the Sishen mine entitled the steel group to 6,25-million tons of iron-ore yearly, representing the steel producer's share of production from that mine.

But Kumba said that, as a result of a failure by Mittal South Africa to convert its old-order mining rights at the Sishen mine, as required in terms of the Mineral and Petroleum Resources Development Act, SIOC was no longer obliged to supply the iron-ore at a price of cost plus 3%.

Under South African minerals legislation, mining companies had until April 30, 2009, to covert their minerals rights from the old, privately held regime to the new regime, whereby the State, which is now the custodian of all mineral rights in the country, issues exploration and exploitation licences. SIOC has offered to sell an equivalent amount of iron-ore to Mittal from the Sishen mine on commercial terms.

Trade and Industry Minister Dr Rob Davies will seek urgent meetings with Kumba, Anglo American, which is Kumba's majority shareholder, and Mittal to discuss the reasons and the implications of Kumba's announcement, which could have devastating consequences for South Africa's steelmaking industry.