China Steel Corp (CSC, 中鋼) said yesterday it had reached an agreement with leading South Korean steelmaker POSCO to invest in an iron ore mine in Australia, maintaining its move to increase self-sufficiency by securing supplies of raw materials.
The nation’s biggest steelmaker said it would pay POSCO’s Australian unit A$305.2 million (NT$9.2billion) for a 12.5 percent stake in KJTC Pty Ltd, a special purpose vehicle incorporated in Western Australia, which will allow CSC to own a 2.5 percent indirect interest in RHH, the holding company of critical iron ore and gas-mining hub the Roy Hill Project.
With the 2.5 percent stake in RHH, CSC said it would secure 1.38 million tonnes of iron ore a year from the Roy Hill Project, thereby raising its self-sufficiency rate from 2 percent to 7.5 percent, according to a company statement made yesterday.
The Roy Hill Project integrates an open-pit iron ore mine in Western Australia’s Pilbara region. The area has seen increased investments from global resources giants like Rio Tinto PLC and BHP Billiton Ltd in recent years. The project can be accessed through the world’s biggest iron ore port, Port Hedland, on its self-owned 342km railway.
“The investment amount [of] A$305.2 million will be funded as equity into RHH to meet the project’s development costs,” CSC said in the statement.
The project is expected to become operational in 2014 and reach its full capacity of 55 million tonnes of iron ore per year in 2015, the Greater Kaohsiung-based company said.
The deal will be subjected to regulatory approval in Taiwan and Australia, it added.
CSC’s latest investment came after it announced in February it would pay Australian miner MCG Group A$102 million for a 10 percent stake in the MDL162 coal mine in Queensland’s Bowen Basin, which will provide CSC with up to 600,000 tonnes of metallurgical coal per year.
“China Steel wants to buy iron ore and coking coal mines so it can be 30 percent self-sufficient in raw materials within five years,” the company said.
Also yesterday, CSC reported a second consecutive quarterly loss in the first three months of the year, with net losses reaching NT$712.18 million, or losses per share of NT$0.05, compared with a net profit of NT$6.68 billion, or earnings per share of NT$0.48, a year earlier.
The company said in a filing to the Taiwan Stock Exchange its revenue totaled NT$53.61 billion in the first quarter, down 5.13 percent year-on-year.
Shares of CSC remained unchanged at NT$29.0 yesterday before the announcement of the new plan, compared with a 0.54 percent rise in the TAIEX. So far this year, the stock has edged up 0.69 percent, while the TAIEX has moved up by 6.35 percent, according to Taiwan Stock Exchange data.