[miningmx.com] – THE Department of Mineral Resources (DMR) last year made a brave face of the Constitutional Court’s (Concourt’s) treatment of its appeal regarding the right to award a share of Kumba Iron Ore’s mining licence to Imperial Crown Trading (ICT).
This is the matter where ArcelorMittal SA (AMSA) forgot to convert its old order mining licence in Sishen Iron Ore Company (SIOC), Kumba’s subsidiary. The DMR subsequently awarded AMSA’s share in the mining right – 21.5% – to ICT.
It was later suggested by media that the award was made under somewhat suspicious circumstances – a claim ICT has strongly denied.
The South African government said the entire legal process – which ran through three courts over several years – supported the robustness of the country’s mining legislation. Hardly: if anything, the entire issue was an imbroglio.
It is a long, intricate legal tale but in essence the ConCourt confirmed AMSA erred by not converting its mining rights, that DMR had the right to re-award the residual share, but that SIOC was the only company that could feasibly apply for the 21.5% stake.
Naturally, Kumba is delighted although Kieran Daly, an analyst for Macquarie Research, said in a note in late December that “the good news” was already priced into in the stock. “While this ruling is positive . and is a giant step towards closing the door on this legal issue once and for all, this outcome has been part of our base case assumptions for the stock for some time,’ he said.
What happens now is that Kumba must apply for the 21.5% residual share in the mining right. Gert Schoeman, spokesman for Kumba, said the application had been made in 2011 anyway, but it’s likely another will be submitted.
Peter Leon, an attorney for Webber Wentzel, said there are some risks for Kumba still, such as the possibility the DMR could impose conditions on the residual right to protect the iron ore market from anti-competitive behaviour. Besides this, the outcome is crashingly good news for the iron ore firm in need of some good news amid falling production levels.
And bad news for ICT which is also saddled with half of Kumba’s legal costs (AMSA must also carry legal costs), according to Leon. “I imagine this is quite a bit of cash, possibly in the millions of rands as the matter has travelled through three courts (High Court, Supreme Court of Appeal and now the ConCourt),’ he said.
ICT subsequently issued its own statement in which it complained about the fact it wasn’t granted leave of appeal and that statements made by former director-general of the DMR, Sandile Nogxina, regarding the questionable manner in which Kumba applied for the mining permit appeared to have been forgotten.
It also lashed out against Mark Cutifani, CEO of Anglo American which owns Kumba, who was quoted to have said the judgement showed the law protected respectable companies. “We record that ICT is a legitimate company which was fully entitled to apply for the mining rights,” it said in a statement.
These comments are only after-the-fact grumblings, however. The entire event is now behind the DMR, which one senses comes with a sigh of relief, as well as Kumba. Given amendments to mining law are in the pipeline later this year, some of which are aimed at ironing out administrative and interpretive wrinkles, the hope is that South Africa’s mining sector moves into a period of regulatory clarity.
One final gloss on the DMR’s view that this is a victory must surely be contradicted by the department’s reticence to follow Australian firm Aquila Resources to court.
This is another disputed mining/prospecting right involving the government’s Pan African Mineral Development Company (PAMDC) and the Australians over manganese in the Northern Cape.
The South African government is saying PAMDC’s later application for prospecting on land developed by Aquila at a cost of millions of rands trumps Aquila’s recently accepted mining permit application – a development that Aquila wanted to take to court.
Instead, the DMR has turned to an internal appeal and has rejected PAMDC’s prospecting permit sensing, perhaps, such disputes do the country no good, are lengthy and promote uncertainty, and are somewhat expensive to fight.
