Two things to discuss here this morning, the good and the bad, which could lead to ugly

Kumba Iron ore. Two things to discuss here this morning, the good and the bad, which could lead to ugly. First a trading statement from them, for the full year: "Shareholders are advised that earnings and headline earnings are likely to be between R14,000 million and R14,400 million, with headline earnings per share ("HEPS") and earnings per share ("EPS") being between R43.65 and R44.90." Nice, that puts the stock on a ten times historic multiple at the top end of the range.

And now a serious company, not that they were not before, but earnings of 14 billion Rands. Wait for it, bigger than FirstRand and Vodacom in terms of market cap AND LOOKING CHEAP on a historical basis. The reason for the big jump in earnings: "The increase in earnings is attributable primarily to increases in export iron ore prices and sales volumes in the period."

And then the bad, that could be ugly. That mining right or exploration right for 21 odd percent of the Sishen Iron Ore Company and the great unknown Imperial Crown Mining. Of which less is said about their credentials the better, because I have very little clue about their background. Some have explored "the entity" and have found political connections. And I guess that is all you need to know about that. A release Friday which was a little vague and thin in detail. What? Again?

First the history: "Shareholders were previously advised that, as a result of the failure by ArcelorMittal South Africa Limited ("Mittal") to convert its former old order mining right as to a 21.4% undivided share in the Sishen Mine, its old order mining right had lapsed." And then "...the Department of Mineral Resources ("DMR") had granted (the) prospecting right on 30 November 2009 to Imperial Crown Trading 289" And then Kumba fought back: "on 24 May 2010 that SIOC had initiated a review application in the North Gauteng High Court on 21 May 2010 in relation to, inter alia, the decision of the DMR to grant a prospecting right to ICT and the failure by the DMR to consider and grant SIOC's application for a mining right"

And according to Kumba Iron Ore: "Neither the DMR nor ICT has as yet filed their answering affidavits in the review application." And then the plot thickens, you could not make this stuff up if you tried, makes soapie viewing just plain boring:

"In November 2010, in order to avoid further litigation against either the DMR or ICT, SIOC requested ICT to provide SIOC with an undertaking that, pending the final determination of the review application, ICT would not apply for a mining right in respect of the Sishen Mine. SIOC also requested the DMR to provide SIOC with an undertaking that, pending the final determination of the review application, the DMR would neither accept an application from ICT to be granted the residual undivided 21.4% mining right, nor grant such residual undivided 21.4% mining right to ICT."

Are you paying attention, this is getting tricky. All you have to know is that Arcelor Mittal missed out, so they then are trying to buy ICT in an empowerment deal that looks like it enriches a few. Creates overnight multi millionaires. Hundreds of millions before you turn thirty, not bad work if you can get it.



But here is the business lines as far as I can read it: "Following numerous enquiries to the DMR, SIOC was informed by the DMR on 12 January 2011 that ICT had applied for a mining right on 9 December 2010. The DMR also stated that it had accepted ICT's application for a mining right in terms of the provisions of the Minerals and Petroleum Resources Development Act, 2002 ("the MPRDA") on 23 December 2010."

ICT still winning at the DMR, who have accepted the application for the mining right. Wow. Kumba are going to fight this tooth and nail, their passing shot: "SIOC does not believe that there is any legal basis for the DMR to grant the ICT application in due course. SIOC will continue to take the necessary steps to protect its shareholders' interests in this regard." The jury is out, but head butting with the DMR who are adamant in their awarding of the mining rights does not sit well with me. To the courts we go, but there is a lot more than meets the eye here. And this is why I think it could get ugly. We watch. Ironically the bumper profits could strengthen some folks resolve. If you know what I mean.