Lonmin caught up in by-product rights claim

Production and Markets

In what looks like another opportunistic swoop on South Africa’s mineral assets, platinum producer Lonmin plc has been ordered to stop selling by-products by the Department of Mineral Resources after a company associated with a former director appeared to have gained the rights to these commodities.

In a statement the company pointed out that it has mined platinum group metals (PGM) and associated minerals at Western Platinum Limited and Eastern Platinum Limited for over 30 years. “Associated minerals are inextricably linked to PGM in the ore body and it is not feasible nor economically viable to mine them alone,” added the company.

Lonmin says prospecting rights were received on a portion of its property by Holgoun, a company owned by associates of former director, Sivi Gounden, who resigned from the company board in October last year.

Earlier this year, a pricing dispute between Kumba Iron Ore Ltd and ArcelorMittal South Africa Ltd was further complicated, after a relatively unknown company, Imperial Crown Trading Ltd gained the right to 21.4% of the Sishen Mine for which ArcelorMittal had failed to apply.

Lonmin believes it is entitled to mine and dispose of the associated minerals, namely nickel, copper, chrome. These minerals contributed US$80 million to Lonmin's turnover in the 2009 financial year.

In order to protect its position it filed MPRDA Section 102 applications which would explicitly give Lonmin these rights. This was done in late 2009.

Lonmin appealed against both the original application by Holgoun in March 2009 and against the award of this right in June but has not yet been notified of the outcome of the appeals made.

“Lonmin has taken comprehensive legal advice on this matter and believes that the action taken by the DMR is wrong and the Company will defend its interests robustly,” said the company.

Chrome producer, Merafe Resources Ltd, says Lonmin’s announcement will not affect the construction of a chrome recovery plant that was meant to begin sourcing ore from Lonmin next year. The Xstrata-Merafe venture already sources chromite ore from Lonmin.

“The venture has sufficient flexibility and adequacy of ore sources to mitigate any impact in the short to medium term and the venture will review its longer term sourcing strategy only once there is clarity on the outcome of this matter,” said Merafe.