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A new iron-ore supply agreement that will regulate the sale and purchase of iron ore between Sishen Iron Ore Company (SIOC) and ArcelorMittal South Africa could provide a possible extension of the life of Thabazimbi Mine, securing the jobs of 1,300 workers.

The agreement was signed by ArcelorMittal South Africa CEO Nonkululeko Nyembezi-Heita and Kumba Iron Ore CEO Norman Mbazima. It will become effective from 1 January 2014.

The agreement regulates the sale of up to 6.25 million tonnes a year of iron ore by SIOC to ArcelorMittal South Africa, complying with agreed specifications from both the Sishen and Thabazimbi mines.

A positive outcome of this agreement is the possibility it presents to extend the life of Thabazimbi Mine. Based on its current operating configuration, the mine is nearing the end of its economic life, with unit costs having increased materially.

SIOC has started studies to evaluate the viability of Thabazimbi’s extension through certain low-grade beneficiation technologies, and early indications in this regard are promising. 

A potential mine life extension at Thabazimbi will secure the jobs for about 1 300 employees, including 850 permanent staff and small- to medium-sized suppliers located in the immediate vicinity of the mine.

The two CEOs expressed their confidence that this agreement will secure the long-term sustainable supply of iron ore to ArcelorMittal South Africa for the life of the Sishen mine at favourable prices.

Although Thabazimbi Mine has operated under the current agreement as a captive cost-plus mine with the costs borne by ArcelorMittal South Africa, under the new terms, operational and financial risks will pass to Kumba. Thabazimbi Mine will become an alternative source of iron ore to ArcelorMittal South Africa from the Kumba portfolio of mines.

“We are delighted to have reached agreement on a long-term holistic solution that meets the requirements of both companies and is consistent with the government’s objectives with regard to beneficiation,” said Mbazima.

Nyembezi-Heita concluded: “This is an exciting development that bodes well for the long-term security of iron ore supply to ArcelorMittal South Africa. Moreover, it will lend stability to the steel industry in South Africa.”

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