ArcelorMittal to buy back controversial Sishen mine stake for $110 million
11 August 2010
ArcelorMittal South Africa plans to pay 800 million rand ($110 million) to buy back its 21.4-per cent stake in Kumba Iron Ore's (KIO) Sishen mine that was arbitrarily awarded by the South African government to Imperial Crown Trading 289 (ICT).
ICT, which has never transacted any business in its existence, will be first company in South Africa's history to have made $110 million in just four months for a next-to no investment.
The South African government awarded ICT the 21.4-per cent stake in the Sishen mine held by ArcelorMittal South Africa for an undisclosed sum after thye steel maker failed to convert its mining rights at the mine by an April 2009 deadline.
Under a new South African mining legislation, mining companies had to convert their mining rights by 30 April 2009, from private holdings to holdings in favour of the state, which is now the custodian of all mineral rights in the country and issues exploration and exploitation licenses.
Since ArcelorMittal failed to convert its mining rights, Anglo American, a diversified mining group, shrewdly exploited this law in February 2010 and cancelled a 2001 agreement between its subsidiary Sishen Iron Ore Company (SIOC) and ArcelorMittal to supply iron ore to the steel maker on the agreed cost plus 3 per cent basis, but said that it would be willing to supply at market prices. (See: ArcelorMittal's Kumba iron-ore deal jettisoned by Anglo American)
Luxembourg-based ArcelorMittal filed a suit against SIOC for terminating a valid agreement and had said there was no need to convert its 21.4 per cent stake in the mine, since it was a right to an already converted right.