The Sishen Iron Ore Company (SIOC) is reportedly not the only mining company to have applied to the Department of Mineral Resources (DMR) for the 21,4% undivided share of the Sishen iron-ore mine, which has reportedly been forfeited by JSE-listed steel group ArcelorMittal South Africa.

The failure of ArcelorMittal South Africa to convert the right in line with the prescripts of the Mineral and Petroleum Resources Development Act was at the centre of SIOC's decision to cancel, as from March 1, 2010, a cost plus 3% supply agreement for 6,25-million tons of Sishen iron-ore supplied.

However, neither the DMR's spokesperson Jeremy Michaels, who on Wednesday, confirmed that the "mining right in question had reverted to the State", nor a host of possible bidders canvassed by Mining Weekly Online were prepared to confirm the other applications.

In fact, Michaels stressed that the department never commented in public on mineral rights applications.

"All I can confirm, is that the holder of the right in question did not submit an application for conversion by the deadline of April 30, 2009, and has, therefore, lost the right," Michaels said in a telephonic interview, acknowledging that it was now possible for others to apply.

It was also possible that the State might decide to allocate the right to a State-owned mining company in a bid to use it as an instrument to influence steel prices. But all Michaels would say, was that various government departments were in communication on the matter and whether a strategic intervention could be made.

A Kumba Iron Ore (KIO) spokesperson told Mining Weekly Online that the State was now the "custodian", not the "owner", of the remaining and "unallocated" mining rights.

"The State neither becomes the owner of the unallocated right, nor can it demand the benefits of the residual rights. It can only act as a functionary in determining applications from entities to be granted a right," the spokesperson said.

Commenting on the issues on Thursday, Trade and Industry Minister Dr Rob Davies told journalists in Cape Town that government was monitoring the "implications of the dispute for the broader economy".

"We are, of course, concerned if this has any implications on the steel price in this country, and on the availability of our resource for local beneficiation into steel products," Reuters quoted Davies as saying.

In a note to shareholders last week, Anglo America's KIO, which owns 74% of SIOC, confirmed that it was currently engaged in discussions with the DMR in relation to the residual 21,4% old-order mining rights in respect of the Sishen mine.

KIO owns 74% of SOIC, Exxaro 20%, the SIOC Community Development special purpose vehicle 3%; and the SIOC Employee Share Participation Trust 3%.

MULTIPLE APPLICANTS?

Exxaro's Wim de Klerk said that he could not comment on the matter, as did BHP Billiton's Illtud Harri, while African Rainbow Minerals was not in a position to immediately respond to the enquiry.

However, Xstrata's Songezo Zibi confirmed that the company would not be applying for the right, explaining to Mining Weekly Online that the group preferred to participate in ventures that it could control and operate.

Similarly, Assore's Phil Crous said that Assore did not apply for the residual 21,4%, which was held by ArcelorMittal SA.

ArcelorMittal South Africa indicated that it had heard rumours that there had been a number of applications for the right, but that it had been unable to confirm these.

The group continues to argue that the long-term supply agreement remained "valid and binding" and that it would take "all steps necessary to protect its shareholders in this regard".

A dispute-resolution process, which could include arbitration, was being pursued in line with the initial 2001 unbundling agreement, which saw Iscor separated into a steel entity, ArcelorMittal South Africa, and an iron-ore miner, KIO.

Meanwhile, SIOC was still supplying iron-ore to the JSE-listed steel group and had proposed an interim pricing arrangement. Mining Weekly Online understands that SIOC has given ArcelorMittal South Arica until mid-March to accept or reject this interim arrangement.

Ultimately, though, SIOC was keen to transition to selling the 6,25-million tons on full commercial terms, which would be far higher than the some $26/t a ton currently being paid by ArcelorMittal South Africa. Naturally, this pricing upside would be moderated by the fact that there is limited infrastructure capacity to enable the iron-ore to be placed elsewhere.

But in the context of renewed bullishness around iron-ore prices, SIOC would still be looking for significantly more than it was currently receiving. Indeed, the ING Group has been quoted as forecasting that annual contract prices for Australian iron-ore could rise by 80%, compared with its previous estimate of 40%.

Meanwhile, Con Fauconnier, who was central to the 2001 Iscor unbundling that led to the creation of separate mining and steel companies, confirmed with Bloomberg on Thursday that there had been in-depth discussions regarding the renewal of the mineral rights.

"This was an issue that was discussed in quite a lot of depth," Fauconnier told the wire service, adding, “It’s for each company to paddle its own canoe".

But Bloomberg said that Fauconnier declined to comment on a report in the Financial Mail, which cited two unidentified people as saying that Fauconnier warned ArcelorMittal South Africa five years ago that the iron-ore agreement wouldn’t be valid without a renewal of its mineral rights.

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