South Africa Court: Sishen Iron Ore Stake Award Was Mistake

South Africa's Department of Minerals Resources was wrong to award a stake in the country's largest iron ore mine to a little known company, the High Court ruled Thursday.

Judge Raymond Zondo ruled that Kumba Iron Ore Ltd. (KIO.JO) now holds 100% of the Sishen iron ore mine, with the disputed 21.4% in the operation previously held by a unit of ArcelorMittal (MT), now in the hands of Kumba.

Imperial Crown Trading 289 (Proprietary) Ltd., the company that had been awarded the 21.4% stake, said it plans to appeal.

South Africa-based Kumba launched legal action in August, accusing the government of wrongly awarding a lucrative mine stake to politically connected ICT.

Kumba, a subsidiary of Anglo American PLC (AAL.LN), alleged that ICT illegally tampered with documents during the process and, as a result, its application for the mine stake should have been thrown out. Instead, ICT secured the 21.4% lapsed stake to the Sishen iron ore mine, previously owned by steelmaker ArcelorMittal South Africa (ACL.JO). ArcelorMittal had missed a deadline to convert its right to comply with new mineral regulations, so the right automatically reverted to the government, which put it up for public tender in May 2009.

In remarks to a High Court hearing in August, the DMR's lawyer, Willie Vermuelen, said the department made the correct decision because Kumba filed incorrectly and because the country's mines act stipulates the DMR must work to get more previously disadvantaged players into the industry.

In addition, DMR's legal counsel said Kumba went against regulations by submitting its application a day before Arcelor's right had expired, getting a DMR official to stamp the papers for the next day, which was a public holiday.

-By Devon Maylie, Dow Jones Newswires; [phone]; [e-mail]