Kumba gears for legal action over Faleme

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� Mittal beats Kumba to Faleme iron ore
� Kumba resumes Faleme drilling
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� Iron ore miners cautious on price hike
� No losers in Kumba unbundling
� Lithos sues Kumba over Senegal project

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Kumba gears for legal action over Faleme
Allan Seccombe
Posted: Fri, 23 Feb 2007

[miningmx.com] -- KUMBA Iron Ore will initiate legal action against the Senegalese government once it has confirmed the surprise granting of rights to the Faleme iron ore deposit to Arcelor Mittal.

Faleme would lift Kumba�s project pipeline by more than 12 million tonnes to above 90 million tonnes per annum (mtpa) and the mine would have come stream from around 2010, helping the company surpass its 2015 target of 70 mtpa.

However, Arcelor Mittal�s CEO Lakshmi Mittal said on Friday his company had signed binding agreements with the Senegalese government to develop an iron ore mine at Faleme deposit of some 750 million tonnes in that country at a cost of $2.2bn.

quite surprised

�We were quite surprised to see the news considering that just two weeks ago we were in full discussions with the government and our people were busy with clarifications of some proposals to government that we thought had been well received,� Kumba CEO Ras Myburgh told Miningmx.

Kumba was struggling to reach the government to clarify exactly what had happened. �What the agreement is all about and what it means is unclear to us,� Myburgh said.

�We need to get confirmation from the government of Senegal of the press announcements before we jump into legal action, but surely that seems to me the logical way forward,� he added.

Kumba has a close relationship with the South African arm of Arcelor Mittal. Mittal bought out Iscor, the largest South African steel producer that had an extremely advantageous iron ore supply agreement with Kumba. The agreement was inherited by Mittal.

Mittal buys between eight and nine million tonnes of iron ore a year from Mittal at cost plus three percent.

The relationship with the South African company would be unaffected by developments in Senegal, Myburgh said.

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Kumba�s relations with the Senegalese government had improved to the point where the company was permitted to resume limited drilling on the deposit.

The drilling will continue until Kumba has confirmation of the Mittal transaction, Myburgh said.

The three southern deposits have enough hematite to support a 12mtpa mine and Kumba had been thinking about raising output to 18mtpa, but it will need to include the northern deposit.

If the magnetite is there is any quantity, the Faleme project could be raised to 20mtpa.

Kumba feels its production targets can be met from within South Africa, where the group has large projects, without resorting to Faleme.

�It�s not a train smash. We are targeting 70mtpa. Faleme was one of those potentials. Some of the other projects can help us reach that target,� Myburgh said.

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