[miningmx.com] — ARCELORMITTAL SA (Amsa) has a more-than-even
chance of re-admittance to the JSE/FTSE Africa Index Top 40 when the stock
exchange’s worthies pour over the re-weightings for the second quarter.
That will be good news for the steelmaker, which will be hoping it can preserve or
even improve on the 14% share price gain it has enjoyed over the last month.
The share price recovery dates from 15 December, and has much to do with the
findings of High Court Judge Raymond Zondo, who ruled Imperial Crown Trading 289
(ICT) had no claim to a prospecting licence over Kumba Iron Ore’s operations at
Sishen. In so doing, the High Court also found that Government had awarded Kumba
an undivided new order mining right, even though Amsa was a joint venture partner
in Sishen.
All eyes now fall on arbitration proceedings between Kumba and Amsa, which are
duking out whether Kumba has the right to cancel a cost plus 3% iron ore sales
agreement to Amsa.
Campbell Parry, an analyst at Investec Securities, thought the court judgment
“tipped the scales positively for Amsa, but not enough to unequivocally deliver
previous iron ore price advantages.’
The view is mirrored by Stephen Meintjes at Imara SP Reid, who thought it too
speculative to take a view on whether Amsa could revert to a cost plus 3% price
agreement for its iron ore.
Iron ore is one of the few commodities analysts expect to be unaffected by a
potential slowdown in China’s economic growth. Irrespective of whether China has a
soft or hard landing, the slow pace at which new ore supplies are likely to come on
stream globally implies tightness in the market will be maintained, which is in turn
supportive of the price.
At least there may be a recovery in the domestic steel market, while in other
positive news, Amsa’s Newcastle mill is set to return to full production after its
furnace blew up last year.
Said Brian Morgan, an analyst for BNP Paribas Cadiz Securities: “We remain confident
in the long-term value of the company. The technical issues in the blast furnaces
appear to be rectified and we expect a good production year in 2012.’
– The article first appeared in Finweek. If you want to subscribe to the digital
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