UPDATE: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) 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.

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

"The Court held that no other party may be granted the right to mine iron ore or quartzite at the Sishen Mine," Kumba said. "The Court also reviewed and set aside the grant of the prospecting right to Imperial Crown Trading."

ArcelorMittal said that it believes the supply agreement it had with Kumba still holds. That arrangement where Kumba previously supplied 6.25 million metric tons at cost plus three percent is due to go before an inquiry late 2012.

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.

ArcelorMittal had argued that when Kumba converted its right it did for the whole 100% mining right.

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.

A full judgment will be released Dec. 20.

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