[miningmx.com] — THOSE who appreciate a good dose of irony would
have been greatly amused by Kumba Iron Ore’s quest to bag all the proceeds of
Sishen for its own pocket.
In fact, the drawn-out saga – which became South Africa’s most talked-about
corporate feud of the last two years – provided heaps of irony.
You’ve got to feel for the good people at Kumba. They had it all worked out; the
excitement in Kathu must have reached fever pitch during those last few days of April
2009. The company’s long-held suspicion that ArcelorMittal SA (Amsa) was oblivious
to the MPRDA’s looming deadline for the conversion of old-order mineral rights proved
to be correct, and Kumba was ready to go in for the kill.
A lot was at stake, and the clause in its contract with the old Iscor to “display good
faith and reasonableness in dealing with each other’ long forgotten. Why sell 6.25
million tonnes of your ore every year at less than $25/tonne to an unloved local steel
producer if you could export it for closer to $100/tonne? There’s no place in business
for niceties, and if Kumba didn’t lay a claim to Amsa’s stake then somebody else
would have.
Kumba wasn’t taking any chances, though. It was no good arriving at the Kimberley
offices of the Department of Mineral Resources at 08:00 on the first working day
after Amsa’s rights had expired. What if someone else with the same
intentions had already been queuing? No, Kumba decided to apply on April 30 for that
right – a few hours before it would expire – and “convinced’ the departmental clerk
to have the application stamped May 1, 2009.
So it was done: Brutus had the knife firmly checked in Julius Caesar’s back. The
remaining part was for the DMR to process the application before Kumba could
show off its new-found right to the market and tell Amsa where to shove some 6.25
million tonnes of ore. Incidentally, few would’ve begrudged Kumba its fortune at
Amsa’s expense; when it comes to corporates showing a lack of social ethos, Amsa
is as foul as they come.
Kumba’s sense of self satisfaction must have turned into frustration, though, around
year-end 2009, when no reply on the application from the DMR was forthcoming. It did
know somehow that Amsa definitely “lost’ the right, as it told the steelmaker in
February 2010 it won’t be supplying cheap ore any longer.
Frustration had to make way for shock, however, when Kumba discovered the DMR
had already awarded those rights in November 2009 to an unknown shelf company
that boasted A-list political connections, ostensibly after some dubious shenanigans
at the DMR’s Kimberley offices during the long-weekend in May 2009.
In an unforeseeable twist of fate, the hunter became the hunted. Kumba was no
longer the orchestrator of an opportunistic coup, but the victim of political and
administrative foul play.
It did its best to make the world interpret events this way.
FAST FORWARD
Fast forward to August 2011. At Kumba’s insistence, Amsa joined the High Court
proceedings which Kumba instigated against the DMR and Imperial Crown Trading
over the right, saying the outcome would invariably affect Amsa as much as it would
affect Kumba.
Amsa told Judge Raymond Zondo it could never have lawfully apply for the right, as
Kumba was already granted it in 2008 – by implication drawing a line between
the ownership of the right and the supply agreement. It was the same Amsa that
at first announced it was prepared to buy ICT for just under R1bn to get the right
back, but there you go.
Still, at the time few managed to grasp the paradox of Amsa’s argument. Zondo,
agreeing with Amsa’s view, summarised it as follows:
“I accept that the result of these proceedings is an unusual one in the sense that a
party [Kumba] which believes it does not have a full 100% mining right is found to
have such a right, and that finding is made pursuant not to that party’s application
but pursuant to an application brought by that party’s opponent in the dispute
[Amsa].’
Kumba stated it was “delighted’ that Zondo confirmed Sishen as the only holder of
the right, and that no other entity could be granted competing rights. That was prior
to the release of the full judgment.
It now puts Kumba in an awkward situation where it has to decide whether it will
appeal any aspect of a judgment it was “delighted’ about.
If it decides to appeal, however, it will add another layer of irony to the mix in that
the company will effectively dispute being the judge’s beneficiary as the rightful
owner of the right.
It may very well decide to walk away from all legal proceedings for now, bar an
appeal by ICT, and focus on the separate arbitration process over the supply
agreement.
Kumba’s stance, that the court case (which it initiated) will have no bearing on the
arbitration process, is not surprising under the circumstances.
Just don’t expect everybody else to perceive it as such.
