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Empowerment group emerges as mystery rights holder
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Reporter
Business Day
Friday, March 19, 2010
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The Department of Mineral Resources confirmed last night that it had awarded prospecting rights for a 21,4% stake in Sishen Iron Ore Company (SIOC) to Imperial Crown Trading, a reportedly politically connected empowerment group.
Kumba Iron Ore has appealed against the move as it had applied to the department to take over the stake after ArcelorMittal, its previous holder, had failed to convert it into new-order mining rights.
The timing of the award of the prospecting rights has been questioned as Kumba is in a dispute with ArcelorMittal SA over the cancellation of a contract for iron ore mined in Sishen. News of the awarding of the contract to Imperial Crown Trading emerged only on Wednesday, when Kumba made a statement to the JSE saying that it would appeal.
Last night the department confirmed the new holder of the rights only after numerous queries and speculation that politically connected individuals may have benefited.
Department spokesman Jeremy Michaels said: “The previous holder of the right had failed to apply for conversion of the right from an old- order to a new-order mining right, as required by the Minerals and Petroleum Resources Development Act. Therefore, in terms of the (act) the right had reverted to the state, which is the custodian of SA’s mineral wealth.”
He did not explain why prospecting rights were granted to an area already being mined.
Neither did he explain when Imperial Crown Trading had applied for the right to the mine, or the status of Kumba’s appeal for the stake.
According to a report in MiningMx yesterday, Imperial Crown Trading has Monica Ripepi, Mabelindile Archibald Luhlabo and Prudence Zerah Mtshali listed as directors. It said Ripepi appears to set up and sell shelf companies. Its website describes it as a commodity broker and trader, with iron ore at the top of its list.
The department’s move could also strengthen Kumba’s attempt to force ArcelorMittal to pay market prices for iron ore from SIOC instead of the cost plus 3% it had been paying under a 2001 supply agreement, which Kumba unilaterally cancelled last month.
A dispute has been declared over Kumba’s decision to end the agreement on the grounds that ArcelorMittal failed to convert its 21,4% stake into new-order mining rights, causing those rights to lapse.
The Department of Trade and Industry has expressed concern about the dispute, saying it might have to intervene to minimise the effects on the economy.
This follows concerns that the dispute could have serious implications for the supply and prices of steel.
The companies are now headed for arbitration, and litigation has not been ruled out.
The department’s decision could also validate the basis on which Kumba cancelled the supply agreement.
A related arbitration process in which ArcelorMittal sought to obtain cheap iron ore from Kumba’s Kolomela mine (formerly Sishen South) went Kumba’s way because it was ruled that Mittal had no mining rights there.
It was partly on the basis of this decision that Kumba questioned ArcelorMittal’s right to cheap iron ore from SIOC.
MiningMx reported that among five other directorships, Mtshali is also on the board of Vuna Coal Holdings.
Also on the board of Vuna is Andrew Hendricks, the husband of Lindiwe Hendricks , the former minister of water affairs and a member of the African National Congress.
Vuna, a subsidiary of Vuna Mining Enterprises, and the department were taken to court by Xstrata over contested prospecting and mining rights.
Xstrata said the then Department of Minerals and Energy had granted rights to Vuna in 2005 instead of to itself at a time when Lindiwe Hendricks was the mines minister.
Out-of-court talks have been under way between the three parties and are believed to be close to resolution, MiningMx said.
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