It is reported that a rift between JV partners the New York listed ArcelorMittal and South African empowered company Kalahari Resources was laid bare in a judgment, with the court ordering the world's largest steel maker to honor its commitments.
The South Gauteng High Court ordered ArcelorMittal to pay the JV entity, Kalagadi Manganese, an amount of ZAR 241.3 million within 10 days and to honor its commitments under shareholder agreements in the venture.
Judge Mr Phillip Coppin made scathing comments in his judgment about ArcelorMittal, rejecting the global steel producer's application for Kalagadi to be placed in a business rescue process because it had run out of money. He added that "Instead, it deliberately withheld funding, seemingly knowing that Kalagadi would, as a result, experience financial distress which would render it vulnerable to attack by disgruntled creditors."
He said that "That by balancing its fate of either being liquidated or rescued, there would be an opting of the latter, which would enable Arcelor to achieve possibly more than what it could have achieved by an order for specific performance."
ArcelorMittal, the parent company of ArcelorMittal SA, owns half of Kalagadi Manganese, which is bringing a manganese mine and sintering plant into production this year. Kalahari owns 40% of Kalagadi and the Industrial Development Corporation the remaining 10%.
Kalagadi is to build a smelter at Coega to produce 320000 tonnes of ferromanganese from 2014. Kalahari Resources, headed by Mr Daphne Mashile Nkosi, took ArcelorMittal to court to demand it pay its share of the project after Kalagadi ran out of money and banks declined to advance the project debt, because ArcelorMittal declined to put up security.
ArcelorMittal said it was reviewing the judgment and considering its options. It added that "While ArcelorMittal respects the court’s ruling, it is nevertheless disappointed, as this does not resolve the real issues, namely, that certain material obligations under the Kalagadi Manganese shareholders agreement have been breached, and that there remain serious shortcomings in terms of corporate governance within Kalagadi Manganese."
Under the shareholder agreement, if Kalagadi was unable to fund the project and third party debt could not be raised, it fell to its shareholders to provide development capital pro rata.
Source - Business Day
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