ArcelorMittal sells 15% stake in Canadian unit to Asian group

With demand for steel in Europe tumbling about 8% in 2012 and a cumulative 29% since 2007, Luxembourg-based steel maker ArcelorMittal (MT-N) has decided to sell a 15% stake in ArcelorMittal Mines Canada to an Asian consortium including South Korean steelmaker POSCO and China Steel Corp. of Taiwan for US$1.1 billion.

ArcelorMittal Mines Canada produces about 15 million tonnes of iron ore concentrate a year and more than 9 million tonnes of iron oxide pellets — some of which will now be earmarked for members of the Asian consortium in long-term off-take agreements based on their proportionate interest in the assets.

If the sale is approved, Arcelor will still own 85% of its Canadian subsidiary, which generates about 40% of Canada’s total iron ore production from two large open-pit mines (Mont-Wright and Fire Lake), according to the company’s website. ArcelorMittal Mines Canada also owns the Port-Cartier industrial complex consisting of a pellet plant, storage areas and port facilities, on the Gulf of St. Lawrence.

The Canadian mining unit does not include ArcelorMittal’s stake in the Mary River iron ore deposit in northern Baffin Island, however, which by some estimates is one of the finest undeveloped iron ore deposits in the world due to its extremely high-quality ore and hefty size. The project, about 160 km south of Pond Inlet in Nunavut, is jointly owned by ArcelorMittal and Nunavut Iron Ore, a subsidiary of Iron Ore Holdings LP.

ArcelorMittal is selling off assets to trim net debt, which the company estimated in late October would reach about US$22 billion by the end of 2012.

In December the company took a US$4.3 billion impairment charge on its business units in Europe and in October reported a US$49 million loss on sales of US$19.7 million for the three months ended Sept. 30. The steelmaker also noted at the time that its board of directors recommended cutting the annual dividend payment from US$0.75 per share to US$0.20 per share (subject to shareholder approval at the company’s annual general meeting in May 2013).

At the same time, however, the company said its planned expansion of ArcelorMittal Mines Canada to 24 million tonnes per year (from the current 15 million tonnes per year) was on track for ramp up during the first half of 2013.

Peter Kukielski, chief executive of ArcelorMittal’s mining division, said in a statement that the asset sale was a key component of the company’s game-plan.  “This joint venture incorporating a long-term off-take agreement is consistent with our strategy to forge strategic relationships with key customers as we build our global mining business,” he stated. “This consortium will be an excellent partner as we pursue further expansion at AMMC.”

The deal is subject to approval by the government of Taiwan and is expected to close in two instalments in the first and second quarters of 2013.

ArcelorMittal has over 20 mines in operation and development and is the world’s fourth-largest iron ore producer, according to the company’s literature. ArcelorMittal Mines Canada was set up in January 2008 following ArcelorMittal’s acquisition of the Quebec Cartier Mining Company in 2006.

Last year ArcelorMittal sold off a number of assets to help weather the economic crisis in Europe and weak demand for steel. In mid-November the company sold its 50% stake in Kalagadi Manganese for about US$447 million; in October it permanently closed its Florange plant in France; in July it sold its 48.1% stake in Paul Wurth Group, an international engineering company specializing in the iron and steel industry to SMS GmbH; and in May sold its steel foundation distribution business in NAFTA, (Skyline Steel and Astralloy) to Nucor Corporation for US$605 million. Also in May ArcelorMittal divested its 23.5% stake in energy company Enovos International to AXA Private Equity for about US$435 million.