SA govt says Kumba, Amsa will settle

Reuters | Mon, 19 Jul 2010 19:16

[miningmx.com] -- SOUTH Africa's government said Kumba Iron Ore and ArcelorMittal were committed to reaching an agreement regarding their dispute over the price of iron ore.

The minister of trade and industry, Rob Davies, had called a meeting on Monday after the South African unit of ArcelorMittal said it may need to close a 1.2 million-tonne steel plant due to the price dispute.

Kumba, a unit of global miner Anglo American, in February terminated a long-term deal under which it sold iron ore to ArcelorMittal at a discount, saying it would sell at market rates from March.

The dispute has been in mediation since.

"There was a constructive engagement toward seeking a solution to the current dispute between Kumba and ArcelorMittal," Sidwell Medupe, a spokesman for the department of trade and industry, said in a statement.

"All parties committed themselves to reaching an agreement which will put the country first."

Both companies have agreed to meet on Thursday for further discussions, he said.

ArcelorMittal and Kumba Iron Ore declined to comment on the meeting.

ArcelorMittal's unit rejected Kumba's proposed two new pricing systems while the dispute was in arbitration.

It said the proposals tabled by Kumba would have had an extremely negative impact on its profitability. Up to 4,000 jobs would be affected by the closure, it said.

Pending the outcome of arbitration, Kumba had proposed to supply the steelmaker with iron ore at cost plus three percent from its subsidiary Sishen Iron Ore Company (SIOC), with the difference from the market price paid into an escrow account.

Kumba's second proposal was to supply the steelmaker at a price of $50 per tonne of iron ore delivered to its Saldanha Steel plant and $80 per tonne delivered to the steelmaker's inland plants, pending the outcome of arbitration.

Shares in the ArcelorMittal closed flat at R72 and Kumba's shares were up 1.45% at R344, outpacing a 0.82% weaker JSE Top-40 index.