ArcelorMittal’s 51% subsidiary, ArcelorMittal South Africa, has reached an agreement with Sishen Iron Ore Company (SIOC), a subsidiary of Kumba, for the long-term supply of iron ore.
The agreement, effective from 1 January 2014, allows ArcelorMittal South Africa to purchase up to 6.25Mt of iron ore a year from SIOC, complying with agreed specifications and lump-fine ratios. The price of iron ore sold to ArcelorMittal South Africa by SIOC will be determined with reference to the cost (including capital costs) associated with the production of iron ore from the DMS Plant at the Sishen Mine plus a margin of 20%, subject to a ceiling price equal to the Sishen Export Parity Price at the mine gate. While all prices will be referenced to Sishen Mine costs (plus 20%), there is an agreed price for pre-determined quantities of iron ore for the first two years of the agreement.
This volume of 6.25Mt of iron ore a year includes any volumes delivered by SIOC to ArcelorMittal from the Thabazimbi mine, the operational and financial risks of which will pass from ArcelorMittal to Kumba under the terms of this agreement.
