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New twist in ‘snatched’ Sishen mine rights saga
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Tim Cohen
Business Day
Wednesday, June 23, 2010
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Evidence has emerged that suggests the application by Imperial Crown Trading 289 for a prospecting right over Kumba Iron Ore’s Sishen mine, potentially worth billions of rands, may be tainted by malfeasance, complicating intense behind the scenes negotiations over the status of the right.
Documents viewed by Business Day suggest inconsistencies between the dates on which the application for the prospecting right was signed by the applicant, and the receipt date stamp of the Department of Mineral Resources. It appears the documents may have been stamped as received by the department before they were even signed by the applicant, Imperial.
This and other evidence will strengthen suggestions that dishonest practices were involved in the application.
It also strengthens the hand of those who feel the issue is a matter of principle and should therefore be decided in court, and weakens the position of a strong lobby within Anglo American-controlled Kumba, which wants to deal with the matter by negotiation.
Suggestions of corruption first arose when a prospecting right was granted by the department over an operational mine, something which appears so bizarre that mining industry players widely believe the right was snatched, with departmental officials helping politically well connected black empowerment players to trump an existing application.
The imbroglio developed after steel maker ArcelorMittal failed to apply to convert its rights in its portion of the Sishen Iron Ore Company (SIOC) mine in the Northern Cape in April last year.
Kumba then applied for the same rights, but they were granted in November to a makeshift company called Imperial Crown Trading 289.
It has subsequently become apparent that Imperial Crown’s shareholders include a former African National Congress (ANC) employee, Gugu Mtshali, while 50% is held by Jagdish Parekh, a key executive of the group of companies controlled by the Gupta brothers, benefactors of President Jacob Zuma and his family and other ANC leaders.
Mr Parekh maintains he holds the stake in his own right, although it has been reported by the Mail & Guardian that he actually holds the stake on behalf of JIC Mining Services, a Gupta-controlled company of which Mr Parekh is CE and of which Mr Zuma’s son, Duduzane, is a director and shareholder.
Further complicating the issue is the fact that Kumba chairman Lazarus Zim is closely associated with the Guptas, and is a director on Sahara Computers, the Gupta flagship. The Guptas’ Oakbay Trust is a significant shareholder in Mr Zim’s Afripalm Resources, which controls Mvelaphanda Resources.
Despite this apparent conflict of interest, Kumba has decided not to take Mr Zim up on his offer to recuse himself from Kumba board discussions on the issue.
Kumba has a host of “concerns” about the issue, but a spokesman has expressed the company’s preference for resolving the issue without resorting to further legal action.
The Kumba concerns mainly relate to the granting of a prospecting right over an existing mine which it feels could hamper existing mining, although no Imperial prospectors have yet demanded to work on the site.
Kumba claims it has been forced to take legal action in order to ensure it does not lose its rights, an approach which is apparently a matter of intense controversy within the mineral resources department, which considers this pre-emptive action not required by law. It is also controversial within the company.
Some at Kumba, led it is understood by Mr Zim, have argued that this was an unnecessary pre-emptive move, and “not the way to deal with the problem”. But others consider this a “Venezuela moment”, the point at which the granting of licences takes place according to political payoffs rather than according to a set system in law.
If this proves to be the case, then mining and potentially other investment in SA would begin to take place only on a short-term basis and only if returns are extremely high and relatively assured. Risk aversion would become the watchword and financing costs would explode.
The possibility of malfeasance involved in granting the right complicates the issue further, since it strengthens the potential grounds for setting aside Imperial’s application.
The exact dates on which the application was made are crucial, since the Mineral and Petroleum Resources Development Act specifies that preference must be given to the first applicant.
But it also specifies that preference in granting rights must be given to the “most BEE-empowered” company.
It was on the grounds of this latter provision that the right was ostensibly granted to Imperial. But it now appears from documents seen by Business Day that SIOC’s application for the right was signed on April 23 2009 and stamped received by the department on May 1 2009.
Imperial’s application was signed apparently on May 5 (but the handwriting is indistinct so it could be May 3) and stamped received by the department on May 4. If it was received on May 5, then the department and Imperial would have to explain how an application could be received before it was signed.
Even if it was not, the dates are crucial, since the department then apparently received Imperial’s documents after the April 30 deadline. SIOC’s application was stamped received on a Friday public holiday and Imperial’s the following Monday.
Other documents were dated even later, and some farms were reportedly incorrectly identified in Imperial’s application.
Kumba has asked for a departmental review, but this has not yet been completed. The department has however said it intends to defend Kumba’s action. It has declined to comment since the issue is now the subject of a legal claim. Mr Zim referred inquiries to the company.
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