Anglo American's Kumba unit seeking agreement on raw materials

By Marc Castro

Nov 05, 2013 04:59 PM EST

The Kumba Iron Ore unit of Anglo American Plc had agreed to formalize an agreement to provide raw material to ArcelorMittal South Africa Ltd. Arcelor is the largest steelmaker in the continent and this agreement ends the three year dispute of the two.

According to the agreement, Kumba would sell off nearly 6.25 million tons of iron ore per year to the local unit of Arcelor, known as AMSA. The sources of the ore would be the Sishen and Thabazimbi mines priced at cost plus 20% margin. 

In an interview, AMSA CEO Nonkululeko Nyembezi-Heita said, "The agreement is an entitlement to buy. If we can get iron ore at a better price, then that's what we're going to do without having any obligation to Kumba." This obligation would kick in at the third year of the deal being operationalized. 

The new deal would be finalized for a ceiling equal to the level Sishen can earn for export purposes. 

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