Kumba sues Senegal's Miferso over Faleme

�

�

� We were caught by surprise - Ras Myburgh, CEO, Kumba Iron Ore
� Kumba gears for legal action over Faleme
� Mittal beats Kumba to Faleme iron ore
� Kumba resumes Faleme drilling
� Lithos sues Kumba over Senegal project
� Kumba squares up to Mittal in Senegal

> JSE:KUMBA IRON ORE LIMITED:
18870c

Click here to find out more about how to use this button

Kumba sues Senegal's Miferso over Faleme
Allan Seccombe
Posted: Wed, 18 Apr 2007

[miningmx.com] -- KUMBA Iron Ore has served legal papers on Senegal�s state-owned development company Miferso for the loss of the Faleme iron ore project, CEO Ras Myburgh said.

The legal action comes as little surprise after Myburgh raised the likelihood Kumba, one of the world�s top five iron ore producers, would sue once it had confirmed that Arcelor Mittal had indeed been granted rights to the project in February.

�We have started legal proceedings in Senegal,� Myburgh said. �Based on that, we do not want to go into the details of the case, which is legally sensitive.�

started legal proceedings

There is the option on international arbitration.

Anglo American subsidiary Kumba told the market on Wednesday it had been ordered to withdraw from the Faleme area, where it had recently resumed drilling after a hiatus in its exploration programme because of a dispute with the government over the development of the 750 million tonne resource.

Kumba feels the government has violated its rights by granting the rights to the project to Arcelor Mittal despite an exploration agreement between Kumba and Miferso signed in July 2004.

The Faleme project, which has the potential for a 20 million tonnes/year mine, was within Kumba�s strategy to grow production to 70 million tonnes/year, but it is now considering other projects within South Africa to help it reach that target.

The cost of the project was estimated at $2bn, which included developing a mine, install 340km of rail, refurbishing another 400km and developing port export facilities at Dakar.

Arcelor Mittal has picked up quite a financial burden with the $2.2bn project, funding all the project work, for which Kumba was seeking commercial funding and partners in the project.

Click Here to subscribe to our daily newsletter

Arcelor Mittal forecast production would start in 2011, with peak production capacity of 15million to 25 million tonnes. It was also considering selected downstream steel investments in Senegal.

Arcelor Mittal now faces increased royalty charges of five percent instead of the regular three percent on its sales, Reuters reported this month.

Analysts have said the project did not feature in their base cases for Kumba because it was only due to come into production beyond 2010. Kumba has no experience of project development outside South Africa and some analysts thought it better for the company to remain focussed on its domestic projects.

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

�