ARCELORMITTAL, the world’s largest steel maker, is selling its 50% stake in Kalagadi Manganese for R3.9bn to Kalahari Resources head Daphne Mashile-Nkosi, ending their bitter battle for control of the project.
Kalagadi Manganese is an unlisted company 50% owned by ArcelorMittal, parent of local steel maker ArcelorMittal SA, and 40% by Kalahari Resources. The Industrial Development Corporation (IDC) owns 10%. It comprises a mine and sinter plant.
"A definitive agreement has been reached whereby Ms Mashile-Nkosi, or her nominee, which may be a consortium consisting of some of the existing Kalahari Resources shareholders and/ or other third parties, will acquire ArcelorMittal’s 50% interest in Kalagadi Manganese," ArcelorMittal said.
ArcelorMittal will receive cash of R3.9bn, and the transaction was subject to "financing arrangements".
Ms Mashile-Nkosi said on Thursday that she was confident she could raise the money in the 90-day window available to conclude the deal. She said she was bound by confidentiality agreements and could not give further details.
"I’ve appointed an adviser and we’ve worked out how we’ll fund it, but we’ve not yet finalised anything. We are optimistic that by the 90-day deadline we will have raised the necessary amount of cash to buy them out. I’m confident it will happen. It’s a brilliant project and there’s appetite for it."
It is still unclear whether Ms Mashile-Nkosi will bring in another partner. The new deal, which was agreed on Wednesday, will see Kalahari Resources retaining its 40% stake in Kalagadi, while Ms Mashile-Nkosi or her nominee will buy ArcelorMittal’s 50%.
In July the differences between Kalahari and ArcelorMittal had become so acute, particularly over whether a ferromanganese smelter should be built at Coega in the Eastern Cape, that Ms Mashile-Nkosi said she wanted to buy the steel maker out of the venture. Relations between ArcelorMittal and Kalahari broke down as the steel maker alleged a lack of corporate governance in Kalagadi. In response, Kalahari accused ArcelorMittal of wanting to wrest control of Kalagadi away from other shareholders.
A court case brought by Kalahari against ArcelorMittal would be withdrawn after the transaction was concluded, ArcelorMittal said, and its appeal would also fall away.
"We believe the dispute needed to be settled for the sake of the project and the employees that work for it. We believe this sale achieves that objective," ArcelorMittal said, adding that it was not leaving SA.
The IDC has the option to buy another 10% in the project, bringing it back to the 20% stake it had before ArcelorMittal joined in 2007.
It was not available for comment on Thursday.
"The IDC will follow their pre-emptive rights in terms of the shareholding they own. If they want more, we can talk about it. I’ll meet with them," Ms Mashile-Nkosi said.
"It creates a much simpler structure, which means a much clearer strategy. It will be challenging, but it is in the best interests of the project."
Analysts said ArcelorMittal’s decision fitted into its strategy of selling noncore assets.
"We see the transaction as positive for the stock as ArcelorMittal should record a disposal gain of some $50m as the asset was recorded at $397m book value at the end of financial year 2011," UBS said in a note.
Arcelor paid $432m for the stake in 2007.
Neither party would say if ArcelorMittal retained off-take rights to half the production from Kalagadi — 3-million tons a year of sintered product.
Kalagadi was forging ahead with plans to build a R4.2bn ferromanganese smelter at Coega, Ms Mashile-Nkosi said. Construction could start in April next year and will be completed in 18 months.
The sinter plant will be hot commissioned early next month and production will start in February, processing output from Kalagadi’s underground mine as well as toll treating ore from other miners around Hotazel, in the Northern Cape.
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