(Updates with companies’ comments from fourth paragraph.)
Dec. 9 (Bloomberg) -- ArcelorMittal South Africa Ltd., a unit of the largest steelmaker, and Kumba Iron Ore Ltd. agreed to postpone arbitration over a supply agreement until court proceedings over a mining right at Kumba’s Sishen mine end.
Kumba, a unit of Anglo American Plc, canceled a nine-year accord to supply ore from its Sishen mine to the steelmaker at 3 percent above the cost of production in March 2010, after ArcelorMittal lost its rights over 21.4 percent of the mine because it failed to renew the title. The dispute over the cancellation of the deal was due to be heard in May.
ArcelorMittal South Africa’s lost right was subsequently awarded to Imperial Crown Trading 289 (Pty) Ltd., whose owners include Jagdish Parekh, a business partner of Duduzane Zuma. Zuma is a son of President Jacob Zuma. ArcelorMittal and Kumba’s Sishen Iron Ore Co. asked the North Gauteng High Court to set aside the awarding of the right to ICT.
A ruling in the court case, which was opposed by ICT and the Department of Mineral Resources, will be handed down on Dec. 15. “There is a real prospect that, having regard to the importance of the matters in issue, the unsuccessful parties will apply for leave to appeal to the Supreme Court of Appeal,” ArcelorMittal said in a statement today.
An appeal is likely to be heard before the end of 2012, and the arbitration would only be able to proceed after that, the steelmaker said.
Interim Supply Agreement
The parties would look at renegotiating the interim supply agreement, which provides for a discount to market prices,closer to its expiry at the end of July, ArcelorMittal South Africa spokesman Themba Hlengani said in an e-mailed statement today.
ArcelorMittal is arguing that Kumba’s Sishen Iron Ore already holds the 100 percent mining right over Sishen and that its supply agreement remains valid. Should it win the court case, the arbitration process would be rendered “academic,” it said in a statement.
ArcelorMittal surged 3.4 percent to 62.44 rand by 1:10 p.m. in Johannesburg, the highest intraday level since Nov. 18. Kumba added less than 0.1 percent to 500.10 rand.
Kumba said it believes that the Sishen supply agreement has lapsed and irrespective of the judgment handed down next week, the arbitration will need to go ahead, according to an e- mailed response to questions.
--Editors: Ana Monteiro, Alex Devine
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