Differences have become so acute that Kalahari Resources now wants to buy the world’s biggest steel producer ArcelorMittal out of a R6‚5bn manganese project in which they are both shareholders‚ Business Day reported on Wednesday.
The project is housed in a firm called Kalagadi Manganese‚ which is 50% owned by Arcelor‚ the parent of the local steel maker ArcelorMittal SA ‚ and 40% by Kalahari. The Industrial Development Corporation owns the balance.
The gulf between Kalahari and ArcelorMittal and the degree to which the relationship has soured was revealed in affidavits filed in a battle over payments to develop the mine and sinter plant.
There is disagreement over the construction of a smelter to produce ferro-manganese ore at Coega.
The South Gauteng High Court ruled in favour of Kalahari last month‚ ordering ArcelorMittal to pay R241m and to comply with its obligations in a shareholders’ agreement. ArcelorMittal has applied for leave to appeal and has not made the payment.
"At some point we need to sit down and buy them out. I want them out. I started the project so I’m not leaving‚" Daphne Mashile-Nkosi‚ executive chairwoman of Kalagadi‚ and head of Kalahari‚ said yesterday.
She had received an invitation from ArcelorMittal‚ a $23m sponsor of the London Olympics‚ to the games‚ all expenses paid. She would declin e and after the Olympics wanted to begin serious talks with ArcelorMittal about buying them out. "I find it odd that you call someone all sorts of names and then invite them to stay. I’d have gone if they’d paid the money‚ but I’d rather focus my energies on dealing with the company‚" Ms Mashile-Nkosi said.
"I don’t know if (ArcelorMittal CEO) Lakshmi Mittal wants to mend the relationship or if they’re playing games. I don’t know what they want."
ArcelorMittal said it was not in talks with Kalahari about selling out of the project‚ which will deliver up to 3-million tons of sintered manganese a year. It has a separate offtake agreement for half of the production.
"ArcelorMittal is committed to the project but it requires that corporate governance standards be respected‚" Julian Gwillim‚ the company’s spokesman said‚ referring to allegations it made in court that Ms Mashile-Nkosi and Kalahari were excluding ArcelorMittal from key decisions and denying them access to Kalagadi’s financial and other documents.
"Everything you’re seeing happening is about a power struggle‚" Ms Mashile-Nkosi said‚ and there were four Kalagadi board meetings a year where packs of financial statements‚ cost-control spread sheets and project updates were handed out.
"You have people coming to these meetings every three months and they criticise everything and plot against you‚" she said. Kalagadi will hold its next board meeting on August 13.
Another R2bn is needed to complete the project. The sinter plant will be cold commissioned at the end of this month and hot commissioning will start within two months after that.
The underground mine will start production in the first quarter of next year‚ ramping up to full production of 3-million tons a year within 18 months. The sinter plant will be fed stockpiles‚ fresh ore and third-party material.
This is not the first time the prospect of a split has been raised. Sudhir Maheshwari‚ ArcelorMittal’s senior executive vice-president‚ said in an affidavit prepared for last month’s court battle a buyout of one of the partners was first raised in 2010 and again late last year. Talks foundered over the valuation of the ArcelorMittal stake‚ bought for $430m in 2007.
Mashile-Nkosi said ArcelorMittal wanted to recoup its investment made in a commodity bull run. But the manganese market is weaker now.
Asked who would come in as a partner if ArcelorMittal were bought out‚ Mashile-Nkosi said there had been a lot of interest‚ but no talks.
SOURCE: Money Web
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