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Kumba losing its way in Africa Posted: Tue, 19 Sep 2006 [miningmx.com] -- KUMBA Resources is applying the finishing touches to a 1,000-page prelisting statement setting out its plans to establish Exxaro Resources and a separately listed iron ore company, Sishen Iron Ore. The prelisting documents will be posted in a month. However, once listed all eyes will turn on the companies themselves – with some questions. One is the conspicuous gap in international growth in both. If reasons are sought, it might lie in Kumba’s critical failure to deliver internationally since its formation. Kumba has seen its rights prejudiced in no less than four foreign mining prospects, including being elbowed out of Australia’s Hope Downs iron ore project. Though the company received R1.1bn in payment, it was a sad blow to Kumba’s iron ore plans at a critical juncture. The effect of losing Hope Downs when iron ore prices were set to surge was partially mollified with an agreement to develop the Faleme iron ore project in West Africa’s Senegal. Kumba has in the past said it would hope to mine at least 12 million tons/year over 20 years at Faleme at a preliminary capital cost of $950m. However, in February Kumba heard that its rights to develop Faleme might be infringed by an agreement between steelmaker Mittal and Miferso, the Sengalese government’s vehicle. Mittal buys all of Kumba’s iron ore at below market prices and might therefore compromise its margins in Faleme. That upset was followed by two roadblocks in the Democratic Republic of Congo (DRC). First, Kumba’s Kamoto underground base metals project was swept away. Second, Kipushi – a zinc/copper mine on the DRC border – is in danger of slipping through Kumba’s fingers. Legal activities could be initiated on all of its African projects, says Douglas Taylor, GM for strategy and business development at Kumba. While Kumba’s lawyers might welcome the prospects, it’s difficult to see Kumba’s shareholders being equally excited. So why the failure to retain what would appear to be excellent new business ventures? Taylor alludes to the difficulties of operating in Africa. “We’ve always endeavoured to be above board in our manner in Africa. We’re not prepared to compromise our business ethics.” The implication is that Kumba is losing new business in Africa because competitors have less corporate governance mores than Kumba. Henk Groenewald, a fund manager at Coronation Asset Managers, says it’s difficult to blame Kumba for its misfortunes in Africa. “It’s reasonably difficult to play in Africa because of the lack of governance.”Free news alerts: click here to subscribe
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