Trevor Arran, Investor Relations, Kumba Resources
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» Kumba squares up to Mittal in Senegal
» Metorex to bid for Kipushi
» Kumba losing its way in Africa
» Glimmer of hope for Kumba’s Kipushi
» Kumba to double Mongolian zinc


Lithos sues Kumba over Senegal project
Allan Seccombe
Posted: Tue, 31 Oct 2006

[miningmx.com] -- A PARTNER in the Faleme iron ore project in Senegal, the Lithos Corporation, is suing Kumba Resources for $196m, citing a breach of contract, increasing the turmoil around the disputed project.

Kumba’s board had approved a bankable feasibility study into developing a mine at the deposit in southeast Senegal and the associated infrastructure to get the ore to the coast some 750 km away.

However, Miferso, a state-owned project development company, which owns the deposit and with whom Kumba had an agreement, subsequently signed a memorandum of understanding with global steel producer Mittal to develop the deposit.

Kumba has reserved its legal rights in Senegal.

"We are continuing our discussions with Miferson to establish what their position is and what ours is. Discussions are normally easier than taking legal action," said Kumba CEO Con Fauconnier, adding legal papers had not yet been filed.

A new complication has now been thrown into the mix, with Kumba telling the market on Tuesday a third party in the project, Lithos, has served a summons for a claim of nearly R1.5bn.

“They are alleging that Kumba has had a contractual dispute with them whereby they are no longer involved in the Faleme project as partners,” said Trevor Arran, the general manager of corporate affairs.

"Kumba believes that the claim is without foundation and that Kumba will have no liability with regard to this matter and has received legal advice confirming this view. Kumba will take all steps necessary to defend the action."

Lithos is a private company involved in project promotion and providing private equity, which Kumba's development people met in the very early days of the Faleme project some three years ago, where $3m has been spent, said Fauconnier.

"I'm not quite sure what's prompted this. I haven't seen the legal documents yet. I've only just received them," he said.
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“We are filing papers to defend this action,” Arran said, adding the matter would be heard in a South African court.

Kumba’s success at projects outside South Africa, where it is the largest iron ore exporter and a large coal producer, has been less than rosy.

Kumba, together with its partner in the Kipushi zinc project First Quantum, is involved in a legal dispute with state minerals company Gecamines in the Democratic Republic of Congo (DRC) over Gecamines inviting tenders for the development of the project.

Kumba and First Quantum had a development agreement with Gecamines for the Kipushi project, something Kumba would dearly like to get its hands on to feed its zinc plant in South Africa with fresh concentrate.

Workers at Kumba’s 90% held Rosh Pinah zinc and lead mine in Namibia embarked on a wage strike on Sunday. Rosh Pinah, which produced 119,000 tonnes of zinc concentrate in the 2005 financial year, sends all of its material to Kumba’s Zincor refinery in South Africa, which had zinc metal output last year of 104,000 tonnes.

“There is minimal production at Rosh Pinah now,” Arran said. “There are some stockpiles at Rosh Pinah and there’s enough of a stockpile at Zincor to keep the operation moving.”

Rosh Pinah provided Zincor with 55% of its annual requirements in 2005. Zincor sells nearly 80% of its production to the South African market.

Zincor also buys concentrate from Black Mountain and other third party suppliers. “We’ll look to bring in additional supplies to keep the Zincor operations going.”