Con Fauconnier, CEO, Kumba
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» Kumba thrives but storm clouds form
» Con Fauconnier, CEO Kumba Resources
» Iron ore prices set to increase
» Kumba BEE says debt can be borne
» Kumba to double Mongolian zinc


Kumba squares up to Mittal in Senegal
Allan Seccombe
Posted: Sun, 19 Feb 2006

[miningmx.com] -- SOUTH Africa’s leading iron ore miner, Kumba Resources, could come to blows with the parent company of its biggest local client over an iron ore deposit in Senegal.

Kumba has been examining the economic feasibility of the Faleme iron ore deposit in south-east Senegal and the associated infrastructure to get the ore to the coast some 750km away.

The Senegalese government, through a state-owned project development company called Miferso, owns the orebody.

“It has come to our attention that there is an MOU (memorandum of understanding) between Mittal and possibly Miferso. We are looking to see if it has implications for our project,” said Con Fauconnier, Kumba’s CEO.

Mittal bought Iscor, South Africa’s largest steel producer, to create Mittal SA. Mittal SA buys all its iron ore at below global prices from Kumba under agreements set up when Iscor hived off the mining assets to form Kumba.
We know our rights to that deposit
“At this stage we are working on third-hand information. We know our rights to that deposit and now we need to go through a due process to understand if those rights are being infringed,” Fauconnier said.

An analyst said it would be disappointing if the Faleme project slipped out of Kumba’s grasp.

Kumba has already waved goodbye to another desirable project, the Hope Downs deposit in Australia. It lost its rights to half the project when Anglo American took a controlling stake in Kumba. Rio Tinto subsequently bought Kumba’s stake in Hope Downs.

“Faleme has the potential to be a nice-looking venture in the next 10 to 20 years,” said an analyst. “But it’s not in Kumba’s share price at all.”

Kumba has in the past said it would hope to mine at least 12 million tons a year over 20 years at Faleme at a preliminary capital cost of $950m.

“I’m not sure what their attitude is to risk north of the South African border though,” the analyst said.

Fauconnier said Kumba has spent 13 years in the Democratic Republic of the Congo, but has precious little to show for it apart from a possible joint venture in the Kipushi zinc project.

Its potential partner in the project, UK listed Adastra Minerals, is the subject of a hostile takeover bid by Canada’s First Quantum Minerals.

Kumba is not really bothered who it teams up with at Kipushi as long as it gets zinc concentrate for its refinery in South Africa, said Mike Kilbride, head of Kumba's business operations.

The zinc refinery currently produces about 104,000 tons/year. It is struggling with the relatively poor quality of concentrate coming in from local producers that has traces of manganese in it, he said.

Kumba is watching the iron ore price negotiations with keen interest. Iron ore makes up half its revenue stream.
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Kilbride doubted iron ore contract prices in 2006 would match last year’s 71.5% increase, but that the fundamentals in the market pointed to a sizeable double-digit increase.

There is a tight supply situation and mining companies are spending large amounts of money to increase capacity, he said. The market was talking of an increase of between 10 and 20%, he said.

“China is said to be pushing for 10%, but the Japanese could go as high as 20%. We are plumping for 15%,” an analyst said.