[miningmx.com] — KUMBA Iron Ore is said to be pushing ArcelorMittal
SA (Amsa) to pay more for supplies from its Sishen mine; a development that has
seen the parties extend talks over a new interim supply deal.
A two-year-old interim deal whereby Kumba was supplying ore to Amsa’s Saldanha
plant at $50 per tonne, and its inland plants at $70 per tonne, lapsed on Tuesday.
The deal was struck in 2010 and renewed the following year in the wake of Kumba
and Amsa’s dispute related to the steelmaker’s 21.4% old order mineral right in
Sishen.
The interim deal was supposed to govern the two parties’ commercial arrangements
until an arbitration process over Amsa’s right to receive 6.25 million tonnes of ore at
cost plus 3% had been completed; a process which itself was put on hold pending
the outcome of an unrelated and ongoing legal battle.
In an announcement released on Wednesday, Kumba said “extensive negotiations’
have taken place between itself and Amsa on a new interim pricing deal. “The
parties have as yet not reached any agreement in this regard and discussions . are
ongoing.
“Sishen Iron Ore Company continues to supply Amsa with iron ore, on terms that
are presently being discussed between the parties.’
For its part, Amsa said it didn’t foresee any disruption to operations while the talks
were continuing. However, a reliable source close to the process told
Miningmx that Amsa was pushing for the continuation of the existing terms,
while Kumba wanted to see its own production-cost increases reflected in the
pricing.
According to Kumba’s recently published results for the six months to end-June,
interim cash costs at Sishen increased by 20.5%, from $19.04/tonne to
$22.95/tonne, while the realised prices received for its ore fell 21%, or $35/tonne,
to $134/tonne.
“Amsa wants the same terms, but Kumba seems as if they want to go back to a cost
basis,’ the source said. Neither Kumba nor Amsa immediately responded to requests
for comment.
Amsa can ill afford any further increases in input costs. It recorded an operating
margin of only 1.5% during the first six months of 2012 (5.6% in 2011), with an
Ebitda margin of 5.9% (9.9%). Kumba’s operating and Ebitda margins respectively
were 57.3% (70.3% in 2011) and 60% (72.2%) over the same period.
