Posco Studying Bid for ArcelorMittal Canadian Iron Ore Mines

Posco (005490), Asia’s third-largest steelmaker, is considering buying a stake in ArcelorMittal Mines Canada Inc. after last month scrapping a bid for Australia’s Arrium Ltd. (ARI)

“We are studying” a possible stake purchase in the iron ore asset in Canada, Kim Ji Young, a Seoul-based spokeswoman, said today by phone. “At the moment, nothing has been determined.”

A group including Posco may seek to buy about 10 percent of ArcelorMittal Mines Canada that’s worth about $1 billion, MoneyToday reported earlier, citing unidentified banking officials. Posco, which may invest as much as $300 million, hired Morgan Stanley to advise on the possible stake purchase, the Korean-language news provider said. The balance of funds would be raised from the partners, which weren’t identified.

ArcelorMittal (MT) is considering selling about 30 percent of its Canadian iron ore unit, a person familiar with the matter said Oct. 20. ArcelorMittal is working with Goldman Sachs Group Inc. and Royal Bank of Canada, according to the person, who asked not to be named because the deliberations are private.

ArcelorMittal declined to comment. The Luxembourg-based steelmaker fell 0.3 percent to 12.11 euros as of 1:40 p.m. in Amsterdam trading.

Dividend Cut

ArcelorMittal has lowered the dividend, is selling assets and moving output to cheaper sites to help cut $23.2 billion of debt. ArcelorMittal’s rating was reduced to junk by Moody’s Investors Service on Nov. 8, which said the debt reduction required by the steelmaker to keep its investment grade was “so large as to be unachievable.” Standard & Poor’s cut its rating to junk on Aug. 2.

Chief Financial Officer Aditya Mittal said last month that while the company isn’t planning to offload mining assets it’s not ruling out selling stakes in its iron ore assets.

ArcelorMittal Mines Canada produces about 15 million metric tons of iron ore concentrate a year and more than 9 million tons of iron oxide pellets, according to its website. It operates two open pit mines and produces about 40 percent of Canada’s iron ore output.

Posco was a member of a group with Noble Group Ltd. (NOBL) and Korean investors that terminated a A$1.2 billion ($1.25 billion) offer for Sydney-based Arrium last month after the target’s board refused to engage with the group. Arrium is an Australian steelmaker and iron ore producer.

To contact the reporters on this story: Sungwoo Park in Seoul at spark47@bloomberg.net; Sangim Han in Seoul at sihan@bloomberg.net

To contact the editor responsible for this story: Andrew Hobbs at ahobbs4@bloomberg.net

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