UPDATE 2-S.Africa police raid mines department
* Police says investigates allegations of fraud
* Raid relates to Kumba challenging ICT's mineral right (Adds details, quotes, ministry)
JOHANNESBURG, July 27 (Reuters) - Elite South African police investigating possible fraudulent mining permits on Wednesday raided the mines department and a company linked to a dispute between one of the world's biggest mining companies and a unit of steel giant ArcelorMittal.
McIntosh Polela, spokesman for the police Hawks unit, said the raids centered on the government's mining department in Pretoria and its regional offices in Kimberly, which oversees minerals rights in Northern Cape province.
"It is alleged that certain individuals from the Department of Mineral Resources were involved in fraudulent issuing of prospecting rights," Polela said in a statement.
The police raid is the latest twist in a saga that has dented investor confidence in the key sector.
Police also hit the offices of Imperial Crown Trading (ICT), a little-known company with no experience in mining which has become a household name in South African financial circles after becoming embroiled in a dispute between the local unit of global steel giant ArcelorMittal and Kumba Iron Ore , a subsidiary of mining giant Anglo American .
Polela said the operation followed criminal charges lodged by Kumba, adding that the police seized documents which will be used for further investigations.
"We are busy investigating charges of forgery, uttering, corruption and fraud. In simple terms, these relate to among others, falsifying of documents," he said.
The spat started when ArcelorMittal unit's mining rights at Kumba's giant Sishen iron ore mine in the Northern Cape lapsed in 2009 and ICT was awarded prospecting rights to the same piece of land -- even though mining has been going on there for years.
Kumba had applied for mining rights over that same 21.4 percent stake to its Sishen mine it did not yet own. When the right was awarded to ICT, the iron ore producer applied to court to review the mining ministry's decision. The case will be heard in August.
The Department of Mineral Resources confirmed the investigation and said it was fully cooperating with police.
ArcelorMittal said in August in would buy ICT for 800 million rand ($120 million), effectively to gain control once again of its lost slice of the mine and reinstate a lost preferential iron ore supply agreement with Kumba.
The proposed acquisition sparked furious allegations of corruption in the mining ministry because it also involved the transfer of a quarter of the steel-maker's shares to black investors, including ICT and an investment group led by the son of President Jacob Zuma. ($1 = 6.681 South African Rand) (Reporting Ed Stoddard, Ed Cropley and Agnieszka Flak; Editing by Marius Bosch)
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