Amendment of the ArcelorMittal Supply Agreement
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Company Announcement - Shareholders are advised that Kumba Iron Ore Limited and ArcelorMittal SA Ltd have agreed to amend the pricing mechanism of the long term supply agreement (for Kumba to supply ArcelorMittal with up to 6, 25Mtpa of iron ore) that they entered into on 5 November 2013.
Kumba and ArcelorMittal have agreed to amend the pricing mechanism terms of their current agreement from a cost-based price to a price based on an export parity price. The EPP will be calculated on the basis of an international index (the “index price”) and, at certain index price levels, ArcelorMittal will receive a discounted price, as follows: if the index price is between US$60/t and US$70/t, ArcelorMittal will receive a 5% discount to the EPP; between US$70/t and US$80/t, a 6.25% discount would apply and at an index price above US$80/t, a 7.5% discount would apply. If the index price is below US$60, ArcelorMittal will pay the EPP. These terms remain subject to a final definitive agreement being signed between Kumba and ArcelorMittal.
“The current market environment presents significant challenges for the mining and steel industries. This pricing amendment is commercially acceptable and sustainable for both parties. It will iron out the current distortions, whereby domestic prices can exceed those for export, thereby best serving the interests of the industry and country as a whole. Kumba remains committed to supporting a viable and stable domestic steel making industry in South Africa”, said Norman Mbazima, CEO of Kumba Iron Ore.
Independent of the above announcement, shareholders are reminded of the cautionary announcement released by Kumba on 3 November 2015 to exercise caution when trading in the Company’s shares and securities pending a further announcement regarding its engagement with the Department of Mineral Resources regarding the proposed conditions in relation to the consent to the amendment of the mining right to include the residual 21.4% undivided share of the mining right for the Sishen mine.
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