Shabangu must act on Sishen dispute

Brendan Ryan | Wed, 21 Jul 2010 10:11

[miningmx.com] -- MINISTER of Mineral Resources Susan Shabangu “needs to take a leadership role” in the dispute between Kumba Iron Ore (Kumba) and Imperial Crown Trading (ICT) over the Sishen iron ore mine.

That’s the view of Maquarie First South Securities analyst David Pleming in a recently published research note headlined, “Kumba Iron Ore – batting for industry and country.”

Pleming commented in the note that, “on the face of the facts presented, Sishen Iron Ore Company (SIOC – Kumba’s operating subsidiary) appears well positioned in the legal dispute with the Department of Mineral Affairs (DMR) and ICT.”

Pleming said it had taken more than six weeks to get SIOC’s review application from the North Gauteng court.

He did not mention it but Kumba management had refused to make copies of the legal documentation available directly to third parties after the court papers went missing.

He added, “while acknowledging that we have only seen the one side of the dispute, we do agree that it does not make sense to award a prospecting right to a third party on ground that is already being mined.

“The allegations against DMR and ICT suggest improper behaviour by one or even both.

“In its review application against the award of the prospecting right SIOC has lodged fourteen grounds of appeal Some are procedural, with others highlighting the impracticalities of prospecting and mining by different parties at the same time with negative implications for accountability and responsibility for environmental, health and safety compliance.

“Underlying SIOC’s objection is that ICT’s completed application was lodged several days after SIOC’s which is contrary to what was officially communicated.”

Pleming commented, “if any of these allegations are found to be true, the consequences of failed good governance could have dire consequences for mineral right tenure and security and exploration activity in South Africa as well as potentially raising the country’s risk premium.”

He said that Shabangu, “needs to take a leadership role in providing comfort to the market that due process was/will be followed and that should any irregularities materialise, appropriate action will be taken.

“Within the context of a transparent process we expect Anglo/Kumba to seek appropriate remedy.

“Earlier this year DMR minister Susan Shabangu stated that a review of the entire application process was to be undertaken; however the outcome of the investigation is yet to be made public.”

Pleming pointed out that Shabangu could stop the litigation “if she rescinds ICT’s prospecting right.”

Kumba will report its interim results for the six months to end-June on Thursday.

Immediately after the presentation in Johannesburg Kumba CEO Chris Griffith and other executives will attend the second meeting called by trade and industry minister Rob Davies attempting to settle the dispute over the pricing of iron ore supplied by Kumba to ArcelorMittal.