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Nippon Steel to Buy 23% of Mozambique Coal Project

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Oct. 27 (Bloomberg) -- Nippon Steel Corp., Japan’s largest steelmaker, will acquire a 23 percent stake in a $600 million coking coal project in Mozambique to secure raw material supplies as raw material costs surge.

The steelmaker will invest in the Revuboe mine, in which affiliate company Nippon Steel Trading Co. holds a 33 percent stake, the Tokyo-based company said today in a statement. Posco, South Korea’s largest steelmaker, owns about 8 percent, while investment company Talbot Group Holdings Ltd. owns the remainder, the statement said.

Steelmakers globally are investing in iron ore and coal mines to increase self-sufficiency as increased demand from China drives up prices. Costs also rose after top iron ore suppliers Vale SA, Rio Tinto Ltd. and BHP Billiton Ltd. this year abandoned a 40-year custom of setting prices annually in favor of quarterly contracts.

Japanese mills agreed to pay BHP Billiton Ltd. $209 a metric ton for coking coal for the three-month contract to Dec. 31, 62 percent higher than a year earlier.

The partners in the Revuboe project, which will cost between $500 million and $600 million to develop, will complete a feasibility study by December 2011 and production may start in 2014 or 2015, the statement said.

The investment will give Nippon Steel access to about 1.7 million metric tons of the 5 million tons produced from the mine, Toshiharu Sakae, an executive at the company’s raw materials division, said today at a briefing. The supply will lift the steelmaker’s self sufficiency in coal to more than 30 percent from 25 percent.

Nippon Steel, which owns a 32 percent stake in Nippon Steel Trading, fell 1.1 percent to 261 yen at the 3 p.m. close of trading in Tokyo. Nippon Steel Trading declined 1.3 percent to 225 yen.

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

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

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