July 22, 2008
July 22nd (Steel Guru) – Reuters reported that Severstal, Essar, BaoSteel Shougang, Shagang and a Japanese consortium are among the groups that are in the second round of bidding for CSN’s iron ore unit Namisa in Brazil.
As per report, the Japanese consortium is led by a trading house and includes domestic steelmakers. Two sources confirmed that a Japanese group was bidding, but did not identify the companies.
Two separate Chinese consortia are also bidding. One is a steel consortium of Baosteel Group and Shougang Group and the other is top private steelmaker Shagang Group, which could potentially team up with a trading house, smaller steel mills and sovereign wealth fund CIC.
The second round of bids is expected in the next few weeks, although several sources described a somewhat fluid process. One said some potential bidders, such as Anglo American, had yet to commit but could still make a late entry to the bidding.
CSN hired Goldman Sachs earlier this year to sell some or all of it’s Namisa subsidiary, taking advantage of raging demand for iron ore. Goldman had put a USD 10 billion price tag on the asset, the top end of analysts’ range of values, although several investment bankers mentioned a value of USD 7 billion to USD 8 billion.
CSN has plans to boost Namisa’s annual production capacity from 7.5 million tonnes this year to 42 million tonnes. That aspiration, combined with an enterprise value of USD 250 per tonne of iron ore, could justify a price of USD 10 billion or more.
July 18th (RedOrbit) – Indonesian largest state-owned steelmaker PT Krakatau Steel planned to buy stakes in overseas iron ore producers to secure supplies, the Jakarta Post reported Thursday.
“Prices of iron pellets from Brazil, Chile, India and Bahrain have almost doubled this year,” the newspaper quoted Krakatau’s President Fazwar Bujang as saying.
During a preparation of an initial public offering, Krakatau recognized the necessity of mine acquisitions.
Krakatau has been in talks with potential targets and an early finding shows mines in Australia.
The company’s profit amounted to 750 billion rupiah (82 million U.S. dollar) in the first half year, four-fifths of the initial full- year target of 850 billion rupiah.
Krakatau now estimated its net income will rise to between 1 trillion rupiah (108 million U.S. dollar) and 1.2 trillion rupiah (130 million U.S. dollar) in 2008.
July 14, 2008
July 14th (Business Standard) – Move to buy reserves in Western Australia is aimed at supplying iron ore to Corus’ plants.
Scouting for iron ore reserves to feed Anglo-Dutch steel maker Corus, Tata Steel is looking at acquiring an iron ore mine in Western Australia.
“Tata Steel has expressed interest to invest in Western Australia’s iron ore sector,” said Eric Ripper, deputy premier, treasurer, minister of state Development, government of Western Australia.
When contacted, a Tata Steel exectuive said it was only logical for the company to look for iron ore mines in Western Australia since the region had huge reserves.
The sixth largest steel producer in the world with 28.1 million tonnes of annual capacity, Tata Steel is also looking for iron ore mines in South Africa and Australia, among other geographies, the company had earlier said.
The company also has plans to set up a company overseas for consolidating its raw material assets and raise funds in the next 6 to 12 months for acquisitions.
Western Australia is a global supplier of minerals and petroleum products, with exports worth A$53.4 billion in 2006-07. Iron ore was the second highest contributor to that kitty at A$15.8 billion, preceded by petroleum at A$16.4 billion.
The Indian operation of Tata Steel is one of the lowest-cost producers of steel, having access to captive iron ore and coal mines. But it does not export iron ore to Corus, which does not have a single captive iron ore mine.
Corus, which has 19 million tonnes annual capacity, mainly imports iron ore from Brazil to feed its production. This impacts badly on its performance as is visible from the company’s EBIDTA margin, a pointer to the health of a firm, which was 9 per cent for the year ended March 2008 as against Tata Steel’s Indian operation at 43 per cent.
The Indian operation helped the over 100-year-old company to post a relatively good show on EBIDTA margin for the year ended March 2008. However, it came down to 14.05 per cent for the year ended March 2008 as against 31.1 per cent in the previous financial year.
The problem has compounded as the iron ore price has gone up by seven-fold in the international market since 2000.
There is no sign of the price cooling down in the coming days as the world’s second largest steel maker, Nippon Steel, and three other Japanese steel companies recently agreed to buy iron ore this year from BHP Billiton at close double the contract price over the previous year’s price.
Tata Steel had acquired a 5 per cent stake in Carborough Downs Coal Project in Australia with an agreement to purchase 20 per cent of the project’s annual production and entered into a joint venture with Riversdale Mining in Mozambique doling out $100 million for a 35 per cent stake.
It has also entered into a 75:25 joint venture agreement with Ivory Coast Government-owned Sodemi for exploring and developing Mt Nimba iron ore mine, which has an estimated over 500 million tonnes of reserves.
July 4, 2008
July 4th (Economic Times) – South Korean steel giant Posco’s $12 billion project in , one of the largest investments proposed by an overseas company, may finally get going with the government expected to give nod to its proposal for iron ore mining lease and forest diversion clearance plan almost simultaneously next month. The project has been awaiting formal clearances for almost three years now.
Grant of the two clearances would be major step forward in salvaging the steel major’s 12 million tonne (mt) steel project that has been in the midst of controversy ever since an MoU was inked in 2005. The company hopes to begin work on the first phase of 4 mt capacity immediately after getting land and mining clearance and targets to complete it ahead of original schedule of 36 months.
“The government is according utmost priority to the Posco project. In this regard its proposal for prospecting licence for Khandhadhar iron ore block in Orissa would be given as soon as the state sends its recommendations to the Centre. The Supreme Court’s Central Empowered Committee (CEC) on environment has also said that it would recommend for land diversion clearance once there is clarity on mining lease for the project,” an official source connected with the project told ET.
The project requires captive iron ore mines with reserves of about 600 mt. While the state has identified three blocks at Khandhadhar, Melang Toli and Thakurani for the project, only Khandhadhar is close to be being offered to the steel maker. The state is conducting a public hearing from other applicants for the same block and expects to conclude the process by July 26, before finalising the name of Posco as the most deserving applicant for the iron ore block with a firm investment commitment and project development plan. Though the mining block has a reserve of about 200 mt of iron ore, sufficient to meet just one-third of Posco’s total requirement, it could support entire first phase of the steel project.
On the forest diversion plan clearance, the matter has reached the final stages as both state and the Centre have cleared the application and CEC is waiting for clearance of mining rights before recommending PL for Khandhadhar in favour of Posco. The company has submitted its application of forest diversion plan for changing the land use of 3,093 acre of forest land on its project site of 4,004 acres. This clearances would mean that Posco would be in possession of over 3,500 acre of government land soon. It would then begin the process to acquire the remaining about 450 acre of private land.
“We could begin work on the project even if we get a portion of the total project land,” a Posco spokesperson said. Anticipating final lot clearances for the project soon, the company has already finalised a rehabilitation and resettlement plan that has even bettered the one finalised by the state government.
July 2nd (Forbes) – Facing price increases of several multiples for iron ore, and amid ongoing restructuring of the domestic steel sector, northwestern China’s largest steel maker, Jiuquan Iron and Steel Group, also known as Jiugang, took steps to secure a stable supply of iron ore. It formed a partnership with a Kazakhstani mining company to gain access to Central Asian sources of the essential component of steel.
Jiugang has committed assets worth 30 billion yuan ($4.37 billion) to taking a majority stake in a joint venture deal with International Mineral Resources, which is registered in the Netherlands, to mine in Kazakhstan for iron ore, the steel producer announced today. IMR agreed to supply iron ore at the prevailing market price to Jiugang in the future.
The parties agreed to the joint venture last August and have now won approval from authorities in western Gansu province, where Jiugang is based.
The world’s biggest producer and consumer of steel, China has encouraged its steel producers to cooperate with foreign firms to obtain supplies of iron ore abroad. Other iron mining hotspots for Chinese steel producers include regions of Australia, Brazil and India, said Shanghai-based analyst Yukun Le, who tracks steel for Boci Research.
“China is short of iron ore, so the government encourages the domestic steel companies to invest in other companies,” Le observed. Mergers and acquisitions have also been increasingly common within the domestic sector, he said, as part of a government-led effort to create big Chinese steel players to negotiate on an equal footing with the mining giants in the global market.
For its 51% stake in the deal, Jiugang, the country’s 16th-ranked steel maker, will put up its entire steel production assets and mines, as well as its holdings in its Shanghai-listed unit, Gansu Jiu Steel Group Hongxing Iron and Steel Co., and in another firm, Yuzhong Iron and Steel Co. IMR paid cash for the remaining stake.
After the close of trading Thursday in Shanghai, Gansu Jiu Steel Group Hongxing Iron and Steel Co. was up 2.2%, to 9.16 yuan ($1.34).
July 1, 2008
July 1st (Steel Guru) – It is reported that since the hike of international iron ore price, five enterprises in the city of Chongqing including Chongqing Iron & Steel Group invest CNY 200 million together to build Chongqing Steel Resources Company Limited in order to exploit Taohua Iron Mine in Wushan County. Iron ore reserves in Taohua Iron Mines are over 100 million tonnes.
With a total investment of CNY 1.4 billion, the project is expected to be commissioned in 2012.
Meanwhile, Chongqing Steel signed an agreement with Shaanxi Ankang Iron Mine and the company would purchase 1.5 million tonnes to 2 million tonnes of iron ore concentrate from the mine.
At the same time, Chongqing Steel is accelerating the exploitation of Chongqing Qijiang Iron Mine and Banan Jielong Iron Mine.
In the coming years, Chongqing should be able to explore more than 5 million tonnes of iron ore each year by itself, taking over 50% in total demand.