ArcelorMittal Sells 15% of Stake in Canadian Mining Subsidiary

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Researched by Industrial Info Resources (Sugar Land, Texas)--ArcelorMittal (NYSE:MT) (Luxembourg, Luxembourg), the world's biggest steelmaking firm, agreed to sell some of its stake in ArcelorMittal Mines Canada to an Asian consortium that includes South Korea's steelmaker POSCO (NYSE:PKX) (Seoul, South Korea) and China Steel of Taiwan (TW:2002) (Taiwan, Taiwan).

According to a company filing about share sales, POSCO and China Steel of Taiwan will gain access to iron ore from the Canadian mines. ArcelorMittal will retain an 85% stake in Canadian mines.

"We are committed to growing ArcelorMittal's mining business," Peter Kukielski, head of the company's mining operations, said in a statement. The deal is expected to close in two installments during the first and second quarters of this year.

POSCO, the world's fourth-largest steelmaker by output, imports nearly all of its key raw materials and has been actively acquiring overseas mines in recent years. It has made investments in Australia, Brazil, Canada and Africa as it works to boost its self-sufficiency in raw materials to 50% by 2014, from the current 34%.

Also, China Steel is aiming to gain 30% of its iron ore and coal needs from mines in which it has investments by 2015.

"These vertical investments to secure iron ore should help the group to partially alleviate its raw material reliance on producers like Vale and BHP," said David Liao, an analyst at Barclays Capital in Taipei. "Iron ore secured from affiliates should rise to 11.6% from 7.5%."

"Although China Steel will slightly benefit from more diversified raw material supplies post the investments, any benefit to its gross profit should remain limited."

The mining unit, produces 40% of Canada's iron ore. The commodity is shipped by rail from mines in the Labrador province to Port-Cartier on the Gulf of St. Lawrence, where there are processing facilities and a port.

The price of the iron ore slumped to a three-year low to $88 a tonne in September, as the Chinese economy stuttered, but it has since rallied 60%.

Last year, ratings agencies Moody's Investors Service and Standard & Poor's both cut ArcelorMittal's credit rating to junk status because of its high debt and in anticipation of a worsening outlook for the steel industry. According to the latest figures, ArcelorMittal's net debt was $23 billion as of September 30, 2012.

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