SIOC transfers Thabazimbi iron mine to ArcelorMittal
ArcelorMittal SA will take full management control of the processes and costs related to the rehabilitation of the Thabazimbi mine in Limpopo, to be transferred by the Sishen Iron Ore Company (SIOC) in April.
If the conditions are not satisfied by April 28 2017 — or a later date agreed to by the companies — the agreement will lapse and SIOC will proceed with the closure of the mine.
The country’s biggest steel maker says the transfer is in line with its strategy to manage costs more efficiently in “what is a particularly difficult time for the local steel industry”.
“In addition we will investigate the feasibility of different options to possibly restart operations at the mine to supplement the company’s sources of iron ore and with the potential of job creation,” said ArcelorMittal SA CEO Wim de Klerk.
But Charl de Villiers, equity analyst and portfolio manager at Sanlam Investments, said on Thursday he did not expect anything significant to happen in restarting the mine in the near future. He said Thabazimbi had been unprofitable and a weight around ArcelorMittal’s neck for a long time.
The transfer was below JSE transaction thresholds for either of the companies. ArcelorMittal is due to release its annual results at the JSE on Friday.
Until 2014, Thabazimbi was a captive mine owned and run by SIOC, but supplying ore exclusively to and funded by ArcelorMittal. As a result, ArcelorMittal is accountable for 96% of the mine’s current rehabilitation liability. SIOC is responsible for the site’s management and the remaining liability.
Mining operations at Thabazimbi ceased on September 1 2016. The identified assets and liabilities of the mine will be
transferred for R1 plus the assumed liabilities. The remaining 63 SIOC employees engaged in mine rehabilitation and the preparation and finalisation of the mine closure plan will be transferred to ArcelorMittal on comparable terms.
The companies said the needs of the Thabazimbi community had been identified and had been incorporated into the mine’s social closure plan.
ArcelorMittal would also take over this financial obligation, and would be responsible for the execution, implementation and funding of projects, while SIOC would retain oversight rights.
The transfer is dependent on certain conditions being met, most notably competition authority approval, cession of the Thabazimbi mining rights and a satisfactory due-diligence study by ArcelorMittal.
Themba Mkhwanazi, CEO of Kumba Iron Ore, which owned 74% of SIOC, said the transfer demonstrated Kumba’s support for local beneficiation. “This also simplifies the contractual relationship between the parties around the effective management of rehabilitation,” he said.
ArcelorMittal said on Monday that its loss per share in the year to December 2016 was expected to fall by up to 80%. This should provide some relief for shareholders after the company reported a record loss of R8.6bn in financial 2015.
The improvement was mainly due to nonrecurrence of one-off items in 2015 totalling R2.56bn. These included a R1.5bn Competition Commission penalty; costs relating to the closure of the Thabazimbi ironore mine; and the impairment of R4.2bn, mainly at its Saldanha plant and for the Vaal Meltshop closure in Vereeniging.
THE TRANSFER DEMONSTRATED KUMBA’S SUPPORT FOR LOCAL BENEFICIATION