* Case has focused attention on cronyism
* Saga has dented investor confidence in mine sector
By Ed Stoddard
JOHANNESBURG, Dec 15 A South African court
will decide on Thursday whether or not a small but politically
connected company with no mining experience can keep a
prospecting right it was awarded.
But the stakes are far bigger than one dispute, as the case
has rattled investor confidence in Africa's largest economy and
could have multi-billion rand consequences for Kumba Iron Ore
and Arcelormittal South Africa.
Kumba, a unit of global miner Anglo American, has
challenged the state's award of a prospecting right over a 21.4
percent stake in Kumba's Sishen mine to little-known Imperial
Crown Trading (ICT).
The granting of that right by South Africa's department of
mineral resources raised concerns about political favoritism and
cronyism, as one of ICT's owners is a business partner of
President Jacob Zuma's son Duduzane, and the company has no real
Thursday's ruling will be the latest twist in a long and
complex saga, ending with a decision whether ICT should keep the
right. Few think it will.
"I would be very surprised if the court granted ICT the
right, because the circumstances under which the right was
granted were so extraordinary," said Peter Leon, a mining expert
at Johannesburg law firm Webber Wentzel.
"In this particular case, the regional manager in the
department and other officials had recommended against the
grant, and the deputy director general at the time approved it."
If the judge says ICT can keep the prospecting right, that
will probably allow it to apply for the mining right.
If, as expected, the judge rules that ICT should not have
been granted the right in the first place, he may set it aside
but say that only Kumba can apply for the mining right.
Thursday's court drama will also have profound implications
for steelmaker Arcelormittal's South Africa unit, as it allowed
the right in question to lapse in 2009. This was subsequently
granted to ICT.
Arcelormittal is welded to the case because a preferential
supply agreement with Sishen that enabled it to buy iron ore at
below market prices was tied to the right, and Kumba says that
has now lapsed.
This is being hashed out in a separate arbitration process,
but Thursday's ruling could ultimately have a bearing on this,
and the stakes are huge for both companies, as the preferential
iron ore supply deal is worth billions of rand a year.