Anglo American’s Kumba, ArcelorMittal reach iron ore supply deal

Anglo American’s Kumba, ArcelorMittal South Africa reach iron ore supply deal

Sishen mine, located in South Africa’s Northern Cape Province, is Kumba’s flagship operation and one of the largest open-pit mines in the world.

After three years of differences, Anglo American’s (LON:AAL) Kumba Iron Ore unit signed Tuesday an agreement to supply the raw material to ArcelorMittal South Africa, the continent’s biggest steelmaker.

The deal, effective Jan. 1, marks the end of all existing legal battles between the two companies, which have been at loggerheads since a preferential iron ore supply deal went sour in 2010.

The agreement’s main objective is to secure the long-term sustainable supply of iron ore to ArcelorMittal for the remaining life of Anglo’s Sishen mine at "favourable" prices and see a possible life extension for the Thabazimbi mine, the company said in a statement.

The Johannesburg-based company added the price of as much as 6.25 million metric tons of iron ore sold annually to ArcelorMittal by Sishen Iron Ore Company (SIOC) will reference costs of production plus a 20% margin and will be subject to a ceiling equal to Sishen’s so-called export parity price.

The accord also includes any volumes from Kumba’s Thabazimbi mine, which life may now be extended.

"Thabazimbi had a very short life left and costs were escalating significantly. We will now be able to evaluate the extension of life through low grid beneficiation processes," said Kumba Iron Ore CEO, Norman Mbazima. "If [our interventions] are successful, and we are confident they will be … Thabazimbi will continue to produce for a very long time."

The move would secure 1,300 jobs, including 850 permanent positions, the firm said.

Image by Rogiro, via Flickr Commons