JOHANNESBURG (miningweekly.com) – South Africa's Department of Mineral Resources (DMR) has initiated an "internal review process" of its controversial decision to issue a prospecting right to little-known black economic-empowerment (BEE) company, Imperial Crown Trading 289, in respect the 21,4% undivided share of the Sishen iron-ore mine, in the Northern Cape, which had hitherto been mined by Sishen Iron Ore Company (SIOC) on behalf of steel group ArcelorMittal South Africa (AMSA).
SIOC notified AMSA in February that it had cancelled a discounted iron-ore supply deal, priced at cost plus 3%, on the basis that the steel group had failed to convert its minerals rights in line with the provisions of the country's post-apartheid Mineral and Petroleum Resources Development Act (MPRDA), which saw the country's mineral rights fall under State custodianship - miners and prospectors had until April 30, 2009, to meet the conditions necessary to secure their rights and licences.
SIOC and Imperial Crown Trading both applied for the "lapsed" right on May 4, 2009. But it emerged last week that the DMR had decided to grant a prospecting right to the latter, despite that fact that the property has had an operating mine on it since the 1950s, and despite SIOC's well-established BEE credentials. SOIC, which is 74% owned by Anglo American's Kumba Iron Ore also has BEE miner Exxaro as a partner, as well as Sishen employees and surrounding communities.
DMR confirmed receipt of "written representations" from SIOC subsequent to the granting of the prospecting right to Imperial Crown Trading, and acknowledged that these had raised "various concerns of a legal and technical nature".
"Having perused the written representations by SIOC, the department is of the view that the company's concerns warrant further investigation into the legal and technical aspects of the matter," the DMR said, adding that the review process to be followed is provided for in the Act, and would, ultimately, be forwarded to Minister Susan Shabangu "for a final ruling in terms of the relevant statutory provisions of the Act". No timeframe was given for the review period.
DMR noted that, during 2005, SIOC applied for conversion of its 78,6% undivided share of the Sishen mine, which it received on May 12, 2008. It also confirmed that AMSA failed to convert 21,4% undivided share - an omission which led to a reversion to State custodianship.
This enabled "any person to be legally entitled to make an application" for the rights, with SIOC and Imperial Crown Trading applying for a mining right and a prospecting right respectively. "On 30 November 2009, this administrative process duly led to the granting of a prospecting right to Imperial Crown Trading 289 in respect of the area (certain parts of the Sishen Mine) and the minerals (manganese and iron-ore) applied for by the company. The prospecting right was granted in respect of the 21,4% undivided share and was subsequently issued," the DMR explained in the statement.
Meanwhile, Mining Weekly Online understands that the details of an "interim pricing arrangement" between AMSA and SIOC could be concluded in the near term, while the two companies were at an advanced stage of negotiation on the channel through which they would seek to resolve their dispute.
But neither company was willing to elaborate further over the long weekend on the surprise move by the DMR to grant a prospecting right in respect of the "lapsed" 21,4% undivided share of the Sishen mine.
KIO has indicated that that it is pursuing its objection to the granting of the right to the little-known Imperial Crown Trading 289 on the basis of the appeal process prescribed in the MRPDA.
AMSA, meanwhile, would not comment further on the matter, saying only that it was considering all its legal options, having insisted previously that its rights and an associated supply agreement remained intact.
The supply agreement, which was concluded as part of the 2001 unbundling of the then Iscor, was meant to be a 25-year, but "evergreen" deal guaranteeing AMSA access to 6,25-million tons a year of Sishen ore on the cost plus 3% pricing formula.
Material continues to flow from the mine to AMSA's South African mills, with discussion continuing on what price would be charged as from March 1, 2010, onwards - the date on which SIOC cancelled the discounted price agreement.
KIO told Mining Weekly Online that it had not yet invoiced AMSA for March deliveries.