ArcelorMittal to sell $1.1 billion stake in Canada iron ore unit to POSCO group

SEOUL/HONG KONG Wed Jan 2, 2013 8:03am IST

A logo of POSCO is seen at the company's headquarters in Seoul October 21, 2011. REUTERS/Jo Yong-Hak /Files

A logo of POSCO is seen at the company's headquarters in Seoul October 21, 2011.

Credit: Reuters/Jo Yong-Hak /Files

Related Topics

Stocks

   

SEOUL/HONG KONG (Reuters) - ArcelorMittal(ISPA.AS), the world's biggest steelmaker, will sell a $1.1 billion stake in a Canadian iron ore mine operator to a consortium that includes South Korean steelmaker POSCO(005490.KS) and Taiwan-listed China Steel Corp, China Steel said in a statement.

ArcelorMittal, formed in 2006 when India-born Lakshmi Mittal's steel business bought European peer Arcelor for $33 billion, is battling sluggish steel demand and is looking to offload assets to cut debt.

The sale of a 15 percent stake in Canada's Labrador Trough iron ore mining and infrastructure asset is part of that process.

POSCO, China Steel and ArcelorMittal Mines Canada will own Labrador Trough through a joint venture and will enter into long-term iron ore supply agreements, China Steel (2002.TW) said in the statement on its Website.

POSCO shares were up 2.6 percent, while China Steel rose 0.6 percent.

The transaction is subject to approval from the Taiwanese government, and is expected to close in two instalments in the first and second quarters of 2013, the statement said.

The deal will give POSCO, the world's fourth-biggest steelmaker, access to iron ore and coal used to make steel, as it currently imports nearly all of its key raw materials. POSCO already owns a 12.5 percent stake in Australia's $10 billion Roy Hill project.

Earlier on Wednesday, a South Korean wire service Yonhap Infomax reported China Steel and POSCO would jointly contribute $540 million, while the remainder was expected to be paid by financial investors including the National Pension Service.

A POSCO spokeswoman confirmed a consortium involving POSCO signed a stock purchase agreement to acquire a stake in the iron ore mine operator, but declined to elaborate on details.

ArcelorMittal is one of Canada's top exporters of iron ore to steel markets around the world and its operations account for about 40 percent of Canada's iron ore output. It operates two large open-pit mines in the province of Quebec, where it also owns the Port-Cartier industrial complex that includes a pellet plant, storage areas and port facilities for shipping.

Last month, ArcelorMittal wrote down the value of its European business by $4.3 billion, underscoring gloom about prospects for the region's recession-hit manufacturers.

A source had previously told Reuters that POSCO was seeking to buy the stake with South Korea's National Pension Service and other investors.

Credit agency Fitch has cut ArcelorMittal's long-term issuer default rating to BB+, just below investment grade, due to the challenging outlook for Western European steel markets in 2013.

ArcelorMittal, which makes about 6-7 percent of the world's steel, says demand in Europe had fallen 29 percent since 2007 when the financial crisis started.

Goldman Sachs (GS.N) and RBC Capital Markets were advising ArcelorMittal on the deal, while Morgan Stanley (MS.N) is advising the POSCO consortium.

(Reporting by Joyce Lee and Denny Thomas; Editing by Michael Perry)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Pricing Controls

REUTERS SHOWCASE

India-China Relations

India-China Relations

India says to defend China border after standoff ahead of Xi visit.  Full Article 

Importing Iron Ore

Importing Iron Ore

As mining curbs bite, India offers market to glut-hit iron ore.  Full Article 

Lower Output

Lower Output

IOC cuts refinery output as rains hit fuel demand - source.  Full Article 

Drug Approval

Drug Approval

Epirus, Ranbaxy win India approval for arthritis drug copy.  Full Article 

Farming and Technology

Farming and Technology

Climate smart farmers get tech savvy to save India's bread basket.  Full Article 

Rajan Speaks

Rajan Speaks

RBI chief Rajan says limiting reliance on foreign debt.  Full Article 

India-Vietnam Ties

India-Vietnam Ties

India tightens Vietnam defence, oil ties ahead of China Xi's visit.  Full Article 

Debt & Equity Deal

Debt & Equity Deal

KKR to lend $175 million to GMR Infrastructure - source.  Full Article 

Preparing for IPO

Preparing for IPO

Alibaba boosts IPO as demand strengthens.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage