ArcelorMittal receives go ahead on US$2.2 billion Falémé project

Senegal grants ArcelorMittal the go-ahead with the US$2.2 billion Falémé iron ore project despite a court case by South Africa’s Kumba Iron Ore, which is saying that it has been overlooked after years of exploration on the site.

WINDHOEK - 

ArcelorMittal, the world's largest steelmaker, will go ahead with the disputed US$2.2 billion iron ore project in Senegal after it was granted concessions to develop mining, transport and logistics activities in the south east of the country.

The steel group will develop an iron ore mine in the Falémé region of south eastern Senegal, whose estimated reserves are approximately 750 million tons in four locations, comprising both hematite and magnetite deposits, build a new port near the capital Dakar and some 750 kilometres of rail infrastructure to link the mine to the port.

The Senegalese government officially handed over the concessions to ArcelorMittal at a ceremony in Dakar on Wednesday, following a string of agreements sealed on February 21.

Once completed, the mine will produce 25 million tons per year of high grade iron ore, ArcelorMittal said Thursday, and production is expected to start in 2011.

The project is expected to provide up to 10,000 jobs to Senegalese citizens.

The Falémé project will not only prove to be an important and competitive source of iron ore supplies for our international plants but a notable contribution to the economy of Senegal," said Lakshmi Mittal, President and CEO of ArcelorMittal. "This is an important step in our strategy of creating West Africa as a mining hub for iron ore supplies to our steel plants around the world."

He added, "We are confident Senegal will prove to be a strategic location to extend our existing footprint in West Africa."

Mittal's company has long indicated its intention to produce about 80 percent of the iron ore it uses within the next decade in a move it says is aimed at protecting itself against price increases from the three companies that dominate the market: BHP Billiton Ltd, Rio Tinto Plc and Brazil's Cia. Vale do Rio Doce, which together control about 80 percent of the world's iron ore.

It has also purchased iron ore facilities in Liberia.

The Senegalese government decision however comes despite a hearing, which started in May, in a Dakar general regional court between South African based Kumba Iron Ore and Miferso, the state development agency.

The South African company instigated a court case in April after Miferso in 2006 overlooked it over the Falémé iron ore exploration area in which it had spent several years and millions of dollars exploring resulting in it being ordered off the site.

Kumba is arguing that the Senegalese government's conduct violates its contractual rights. It had hoped to mine at least 12 million tons a year over 20 years at Faleme at a preliminary capital cost of $950 million.

The biggest iron ore producer in Africa exercised an option to acquire a controlling stake in the Falémé project some time ago, but Senegal put this interest in dispute in 2005, and went ahead to involve ArcelorMittal in 2006.

But an agreement Kumba had signed with Miferso in late July last year had only been pinned at the prefeasibility-study stage of the project.

But the draw card for ArcelorMittal may have been its agreement in April to pay a five percent royalty on iron ore from the Falémé mine project, when Sengal's mining code dictates a three percent royalty.

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