| Tue 30 Mar 2010, 12:00 | | ACL - Arcelormittal Update and Renewal of Cautionary Announcement |
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ACL
ACL
ACL - Arcelormittal Update and Renewal of Cautionary Announcement
ArcelorMittal South Africa Limited
(Incorporated in the Republic of South Africa)
(Registration Number 1989/002164/06)
Share Code: ACL
ISIN: ZAE000134961
("ArcelorMittal")
ARCELORMITTAL UPDATE AND RENEWAL OF CAUTIONARY ANNOUNCEMENT
Further to the announcements dated 26 February 2010 and 3 March 2010 pertaining
to a notice that was received by ArcelorMittal from Sishen Iron Ore Company
(Proprietary) Limited ("SIOC"), ArcelorMittal`s shareholders are advised that
ArcelorMittal remains firmly of the opinion that all the terms contained in the
current agreement relating to the annual supply of 6,25 million tons of iron ore
from SIOC to ArcelorMittal at cost +3%, remain of full force and effect. The
dispute resolution procedure under the agreement in respect of this matter has
been initiated.
SIOC has thus far failed to provide documents supporting its contentions.
Having regard to SIOC`s notice that with effect from 1 March 2010, SIOC will no
longer supply iron ore to ArcelorMittal from Sishen Mine at cost +3%, but only
"on commercial terms", ArcelorMittal has been left with no alternative but to
inform its customers that it will, with immediate effect, adjust its commercial
pricing policy. ArcelorMittal will introduce a surcharge ("the Sishen
surcharge") to partially mitigate the additional iron ore cost, based upon the
international spot price for iron ore that SIOC asserts it is entitled to charge
on iron ore supplied to ArcelorMittal, which entitlement ArcelorMittal disputes.
Should ArcelorMittal prevail in proceedings against SIOC in respect of the
contract price, the accumulated Sishen surcharge funds will be refunded to
customers, with any interest earned thereon. In the event ArcelorMittal is not
successful in these proceedings, in whole or in part, the relevant Sishen
surcharge will be available to fund the obligation to SIOC.
ArcelorMittal will endeavour to resolve its disputes with SIOC as soon as
reasonably practicable. Such disputes, by their nature, may, however, take an
extended period to resolve.
ArcelorMittal`s Chief Executive Officer, Ms Nonkululeko Nyembezi-Heita,
commented: "Our pricing policy is going to be unavoidably affected by the
current dispute with SIOC. As we understand the current position, SIOC believes
that it is no longer bound to supply iron ore at the contractually agreed price
of cost +3% and instead claim that SIOC is entitled to charge ArcelorMittal a
price derived from the international spot price for iron ore. We dispute SIOC`s
position and firmly believe that SIOC remains contractually obliged to continue
supplying iron ore at cost +3%, pursuant to our long term contractual
arrangement. It may however be some time before this dispute is resolved and,
in the meantime, we have reluctantly come to the conclusion that the only
prudent course for ArcelorMittal in addressing SIOC`s claims is to increase
steel product pricing, notwithstanding our firm belief that we will prevail in
our disputes with SIOC. We regret that this will involve passing on increased
prices to our customers, given the significant difference between the
contractual rate for iron ore of cost +3% and the spot price for iron ore based
on worldwide indices, which SIOC is asserting an entitlement to charge".
Although ArcelorMittal will continue to export steel in the short term, this
will not be profitable taking into account iron ore input costs as claimed by
SIOC, as well as current steel prices. Management will continue to review the
profitability of operations and, if necessary, adjust the commercial policy and
production levels, which may necessitate plant closures.
The Department of Mineral Resources ("DMR") has informed ArcelorMittal in
writing on 17 March 2010 that its 21.4 per cent undivided share of its old order
right has ceased to exist with effect from 1 May 2009. This is the first
communication that ArcelorMittal has received from the DMR in relation to this
matter. ArcelorMittal is considering its rights in this regard.
Furthermore, ArcelorMittal is engaging SIOC over what ArcelorMittal alleges to
be overcharging on the cost of iron ore supplied to ArcelorMittal over the past
few years.
Shareholders and customers will be informed of developments in this regard and
shareholders are advised to continue to exercise caution in dealing in their
ArcelorMittal securities until a further announcement is made.
30 March 2010
Vanderbijlpark
Sponsor
Deutsche Securities (SA) (Proprietary) Limited
For further information please contact:
Julian Gwillim
Mobile: +27 (82) 452 4389
Date: 30/03/2010 12:00:01 Produced by the JSE SENS Department.
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