Govt may rule in vexed iron ore dispute

Jan de Lange | Fri, 23 Jul 2010 10:28

[miningmx.com] -- PEACE for the moment between Kumba Iron Ore and ArcelorMittal SA (Amsa) means jobs at Saldanha Steel are safe, but key unresolved issues are still in the air, including ownership of the Sishen mine.

On Thursday afternoon three ministers – Rob Davies of Trade and Industry, Susan Shabangu of Mineral Resources and Ebrahim Patel of Economic Development, issued a joint statement which made it clear that the agreement reached was not the end of the matter.

Government took note that the threats of labour cuts and reduced production had been withdrawn after the interim agreement was reached.

But government's view was that, even though the unbundling of Iscor had assumed the form of a commercial contract between two private companies (which was still in dispute), public development obligations were affected.

Iscor's unbundling had resulted in Amsa owning 21.4% of Sishen's mineral rights, but the steel giant had lost these rights last year as it had not converted them into new-order rights.

Kumba is now laying claim to the 21.4%, even though the stake has been awarded by the department of mineral resources to little known Imperial Crown Trading.

Crucial to job growth

The terms under which iron ore and unprocessed steel are delivered to the economy are of national interest, say the ministers.

They are crucial to Ipap (government's industrial policy action plan) and the shift to a more labour-intensive growth trajectory for the economy.

Government will use all means at its disposal to ensure that its aims are achieved, said the ministers, each of whom is highly involved with economic policy.

In the near future they would be meeting with Kumba and Amsa to discuss these issues further.

They said they would also ensure that the settlement did not have a short-term negative impact on the price of steel.

Their statement went on to say they would make sure that the benefits of South Africa's mineral resources were used to develop the country.

Under the interim agreement, Amsa will in future pay Kumba $50/tonne for about 1.5 million tonnes of iron ore it delivers each year to Saldanha Steel, and $70/tonne for a further five million-odd tons it will deliver to Amsa’s inland works at Vanderbijlpark, Vereeniging and Newcastle.

Kumba previously delivered the ore to Amsa at cost-plus-3%.

Amsa CEO, Nonkululeko Nyembezi-Heita, said the agreement meant that Saldanha would be able to carry on without staff cuts.

She said Amsa's current export programme would continue, but its viability would depend on steel prices and exchange-rate fluctuations that needed to be watched carefully at all times.

On July 16 she had declared that up to 4,000 Amsa jobs could be lost if the steel giant had to pay $70/tonne and $80/tonne for its iron ore at Saldanha and the inland works respectively.