Giant South Korean steel maker Posco is investing $1.1 B, along with Tiawanese China Steel Corp., in ArcelorMittal Mines Canada Inc. ArcelorMittal, the world’s largest steelmaker is heavily indebted. The move to sell equity is a classic move to reduce debt and improve Arcelor’s balance sheet.
In a related move ArcelorMittal reduced its stake in the Mary River iron ore project in Nunavut, from 70% to 50%. Now Posco and China Steel will have an ownership interest in the Mary River project. Baffinland Iron Mines Corporation (Baffinland) is owned 50% by ArcelorMittal and 50% by Iron Ore Holdings LP (a hedge fund).
Baffinland expects total annual targeted volume will be optimized to between 18 and 30 million tonnes of ore. To facilitate this objective, over the next 5 years, Baffinland intends to procure and construct the infrastructure required for extraction from its Mary River deposit. The project’s capital cost will be between $4-6 B with construction starting this year.
The equity injection will help financially stabilize ArcelorMittal and the Baffinland project. Posco also has an equity stake in the Mt.Klappan anthracite coal deposit in northern BC.
Asian nations are now the creditor nations. So it goes to follow that Asian companies will have the capital to invest in North American resources.