China’s Baosteel takes SA Govt to court

[miningmx.com] – BAOSTEEL Group, one of the world’s largest steelmakers, is to take the South African government to court after it failed to honour an undertaking to internally resolve a dispute over a prospecting right.

The Chinese company, on behalf of its subsidiary Aquila Steel, is seeking a resolution after a prospecting licence over part of Aquila’s 147.8 million tonne (mt) Gravenhage prospect was awarded to Pan African Mineral Development Company (PAMDC).

The award of the prospecting licence to PAMDC was in 2013 even though Aquila had already explored the area and had had a mining licence application over it accepted. The governments of South Africa, Zambia and Zimbabwe are PAMDC’s shareholders.

South Africa’s Department of Mineral Resources (DMR) averted legal action in 2014 on proviso the matter was dealt with internally and expeditiously since Aquila was hoping to sign freight agreements with Transnet for manganese it may produce from the area.

Promisingly, the DMR first set aside the prospecting right awarded to PAMDC, but it then failed to resolve the dispute internally, saying the matter had to wait until after general elections in May 2014.

The last time the DMR publicly commented on the matter was in February 2014 when former mines minister, Susan Shabangu, said it was “a matter for the courts”. Aquila’s Mike Halliday said at the time all other route to resolution would be sought first.

The other interim development was that Aquila Steel’s parent company, the Australian-listed Aquila Group, was taken over by Boasteel Group.

Boasteel’s Aquila said today subsequent deadlines on resolving the dispute had not been met and that it was forced it to take the matter to the Pretoria High Court.

“Aquila is disappointed that yet another agreed deadline with the DMR has passed and that the matter remains unresolved,” said Miles Zhou, CEO of Aquila Steel. “Aquila has spent more than R150m on exploring the Avontuur tenement,” he said.

“After patiently trying to resolve this matter by the laid down DMR procedures, regrettably, Aquila now has little option but to institute legal proceedings against the South African government to protect its rights,” he said.

The delay in hearing of the dispute is no doubt related to the change of minister in the DMR, from Shabangu to Ngoako Ramatlhodi.

To compound matters, Ramatlhodi has kicked off his time as mines minister at a clip announcing plans to review proposed amendments to mines legislation. He is also dealing with the imminent audit into BEE compliance of mining firms in South Africa.

Nonetheless, the court case will come as a blow to Ramatlhodi who has so far sought to soothe the nerves of private capital over the risk of regulatory uncertainty. It may also concern Ramalthodi – who is a lawyer – that government’s success rate when arguing its case over disputed mineral and prospecting rights in court is very poor.

Aquila Steel, meanwhile, is also contending with a potential counter-suit from the PAMDC. The state-owned firm had hired its own legal counsel last year and wanted to study its rights in a separate review.

Before the Baosteel takeover, Aquila Resources was considering investing up to $480m in South Africa of which $180m would be on the proposed 1.5 million tonne/year (mtpa) Avontuur manganese mine, and between $215m and $300m on Thabazimbi, an iron ore prospect containing an estimated 37.1mt in measured resources.