Kobe Steel to Invest $298 Million in Iron Ore Mine in Australia

Kobe Steel Ltd. (5406), Japan’s fourth- largest mill, will invest 25 billion yen ($298 million) in an iron ore project in Western Australia to secure supplies of the steelmaking ingredient.

The company will indirectly own 9.9 percent of the Southdown mine, which is 70 percent held by Grange Resources Ltd. (GRR), Australia’s largest iron ore pellet producer, the Kobe, Japan-based company said today in a statement. Kobe Steel will take a 33 percent stake in a Sojitz Corp. unit that holds a 30 percent stake in the mine, it said.

Steelmakers including Kobe Steel and ArcelorMittal, the world’s largest, are looking to secure iron ore and coking coal resources as increasing purchases by China and India tighten global supplies. The Southdown mine is slated to produce about 10 million metric tons of magnetite pellets a year starting 2015, according to the statement.

Kobe Steel agreed with Sojitz to acquire 1.5 million tons a year from the mine, located 90 kilometers (56 miles) northeast of Albany Port, according to the statement. The raw material will be used to run Kobe’s pellet plant at its Kakogawa Steel works in western Japan, the statement said.

The stake purchase will increase the proportion of Kobe Steel’s iron ore supply from its own sources to about 20 percent from 7 percent, Hiroyuki Hashimoto, a spokesman for the Japanese steelmaker, said today by telephone.

To contact the reporter on this story: Masumi Suga in Tokyo at msuga@bloomberg.net

To contact the editor responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net

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