September 07, 2008

Kumba initiating arbitration over Faleme iron ore deposit in Senegal

It is reported that Kumba Iron Ore arbitration proceedings against the Senegalese government and Senegal’s state owned development company Miferso are currently being initiated.

It said it felt the government violated its rights by granting the rights to the project to ArcelorMittal despite an exploration agreement between Kumba and Miferso signed in July 2004. If in fact Kumba has been denied its rightful participation in the Faleme project, the company will take all legal actions necessary to preserve its contractual rights including international arbitration."

Kumba’s plans to invest in Senegal’s Faleme iron ore project went sour as it was ordered to withdraw from the Faleme area in the south eastern region of Senegal in April 2007 despite having have resumed its exploration program. The exploration had been delayed by a two year dispute with the government over the development of the 750 million tonnes resource.

Kumba first announced its interest in the Faleme project when it signed an agreement with Miferso in 2004. The agreement granted Kumba the right to conduct and develop a pre feasibility study on the project and an option to acquire an 80% interest in the project from Miferso before embarking on a bankable feasibility study.

ArcelorMittal has in the meantime said that it would go ahead with the disputed iron ore project. It said the Senegalese government officially handed over the concessions to ArcelorMittal at a ceremony in Dakar on Wednesday last week. ArcelorMittal, which has forecast production would start in 2011, has agreed to pay a 5% royalty on iron ore from the Faleme mine project when Senegal’s mining code dictates a royalty of only 3%.