Arrium Wins Significant Interest in Mining Consumables UnitDavid Stringer
Australian steel and iron ore producer Arrium Ltd. has received significant interest in its mining consumables unit as it weighs a potential sale.
The Sydney-based producer is assessing approaches from parties including potential trade buyers and private equity firms, Chief Executive Officer Andrew Roberts told reporters Wednesday.
“It includes both strategics and financial sponsors, in a range of different parts of that industry,” Roberts said on a conference call. “It has been very broad and significant interest.”
Arrium is working with Lazard Ltd. to study approaches for the mining consumables operations, people with knowledge of the matter said in July. The business, which makes grinding and crushing equipment used in mining and processing, may fetch about A$1.5 billion ($1.1 billion), one of the people said. Roberts declined to offer a valuation on the call.
The company, the worst performer in the past year on Australia’s benchmark S&P/ASX 200 index, said in June it was considering divestments after it earlier wrote down the value of its assets by A$1.3 billion, shuttered iron ore mines and cut jobs in response to plunging prices.
Iron ore last month fell to the lowest level since at least 2009 as miners expanded output amid faltering demand growth in China, the largest consumer. Prices may tumble about 30 percent over the next 18 months as supply continues to expand, according to Goldman Sachs Group Inc.
Benchmark ore rose 0.5 percent to $56.92 a metric ton Tuesday, according to Metal Bulletin Ltd. data.
Uncertainty over the outlook in China means iron ore faces a “challenging market” in the coming year, Roberts said. Prices are likely to remain volatile and trade both below $50 a ton and above $55 a ton, he said.
Arrium’s iron ore unit has also attracted some interest from potential buyers, though approaches haven’t “been strong enough for us to want to progress,” Roberts said.
The producer reported a A$1.92 billion net loss in the 12 months ended June 30, from net income of A$205 million in the same period a year earlier, Earnings were “significantly affected by the deterioration in iron ore prices,” Roberts said in a statement. Arrium, which has a market valuation of A$353 million, fell 4 percent to 12 cents in Sydney trading.
The producer acquired the Moly-Cop and AltaSteel units, which became its mining consumables business, from Anglo American Plc in 2010 for $932 million.
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