Stabbed in the back, asleep on the wheel

[] — ON balance, Sishen Iron Ore Company (SIOC), the Kumba Iron Ore subsidiary, doesn’t come out well in Judge Raymond Zondo’s judgement, made available last night.

For those not particularly following the case over which Judge Zondo presided, it’s about who owns what in iron ore fields in the Northern Cape.

The court’s finding was that in applying for conversion of an old order mining right in 2008, SIOC was awarded 100% of the property by the mineral resources department (DMR).

He found that this shouldn’t have been the case because ArcelorMittal SA (Amsa) was entitled to 21.4% of the prospecting right. But in granting it anyway, the DMR couldn’t reverse its decision.

For this reason, a later application for prospecting rights granted to a company called Imperial Crown Trading (ICT), again by the DMR, was void. The 100% award had been made in 2008 and it was to SIOC, not to any other party.

One supposes SIOC should be happy about this. As it happens, the case carries a bit more intrigue than that.

You see, SIOC would prefer it was only granted 78.4% of the mining right in 2008 because then it could later apply for Amsa’s portion, and then make void a cut-price iron ore sales agreement from it to Amsa predicated on the previous joint ownership.

So it’s really all about the money, an opportunism that I think gets more attention in Judge Zondo’s judgement the further you read.

On several occasions, Judge Zondo remarks how unusual SIOC’s position is in the matter. For instance, he finds it particularly odd that SIOC should be pushing for partial ownership of the iron ore fields but should receive 100% ownership by dint of the efforts of its opposition, Amsa.

Judge Zondo never uses the word opportunism, but his summation of SIOC’s position gives the impression of it, I believe.

He does once quote Amsa counsel’s observation that its client was stabbed in the back, to which SIOC’s legal team retorted Amsa had “slept on the wheel”.

In truth, I think it’s both. SIOC may well have been opportunistic – and in a sense isn’t that the way of business? – but Amsa was downright incompetent. I don’t buy for a second Amsa had coolly calculated its legal position back in 2008. But in the end, it’s the ‘back-stabbing’ that Judge Zondo seems to dwell upon.

He accuses SIOC of “double standards” at one point and tartly observes that if SIOC didn’t think it was the rightful owner of 100% of the iron ore, then why doesn’t it dispute 100% of the revenue that monthly accrues to it; or words to that effect. I’m no lawyer, but for the common reader, Judge Zondo is suspicious of SIOC’s and ICT’s motives and disinterested in Amsa’s incompetence.

He finds the law intact on the matter but makes plain DMR incompetence led to unlawful decisions having lawful effects. The new order mining right should not have been 100% awarded to SIOC, but it was. End of story.

He doesn’t dwell on ICT’s application which in press speculation carried associations of insinuations of fraud and other wrongdoing.

He does, however, plainly refer to breakdown in human relations: “In my view, this is the result of the failure by Sishen and AMSA to speak to each other about the lodging of the old order mining right, the failure by the Department to consult AMSA before it decided to grant Sishen a sole and exclusive mining right and the actual grant by the Department to Sishen of a mining right for iron ore … This matter could have been handled better by all parties involved.”

Speaking of human relations, it’s about time the CEOs of Amsa and Kumba Iron Ore sat around a table to hammer out an iron ore sales agreement they can both live with. Better still, if Government helped convene and massage an outcome in such a way that the SIOC/Amsa/ICT dispute ended net positive for South Africa’s investment reputation.