ArcelorMittal Considers Selling Canadian Iron Ore Stake

on Oct 19, 2012

On 18 October 2012, the Financial Times reported that the world’s largest producer of steel, ArcelorMittal (NYSE:MT, AMS:MT), was exploring the option of selling a stake in its $10 billion (£6.2 billion) Canadian iron ore business. The company has been experiencing the general steel industry gloom associated with a prolonged period of overcapacity coming home to roost.

**Potential Iron Ore Stake Sale**
The FT quotes sources as saying that ArcelorMittal had appointed advisers and had also been sounding out potential buyers of a stake in its Canadian business, formerly known as Quebec Cartier Mining.
ArcelorMittal acquired QCM as part of its takeover of Canadian steelmaker Dofasco in 2006. The FT source also indicated that the entire business which produced some 15 million tonnes in 2011 could be worth $8 billion to $10 billion. ArcelorMittal is expected to sell a minority stake, probably about 30 percent.

Reuters reports that ArcelorMittal, one of Canada’s top iron ore exporters, has retained RBC Capital Markets and Goldman Sachs (NYSE:GS) to assist in the process, which has been ongoing for several months. The iron ore stake sale is reportedly generating a lot of interest from Asian steelmakers, keen on securing their own future supplies of the raw material.

**Industry Gloom**
ArcelorMittal, which at the end of June had $22 billion of net debt, has pledged to improve its balance sheet by selling non-core assets, with the FT quoting an analyst as saying that the ownership of iron ore assets was an “indulgence” in the current environment.
!m[](/uploads/story/608/thumbs/pic1_inline.png)And the current environment has not been particularly favourable for steelmakers such as ArcelorMittal, given the prolonged period of overcapacity caused by slowing growth in Chinese consumption and a collapse in European demand. In July, ArcelorMittal’s chairman, CEO and main shareholder Lakshmi Mittal, noted that he saw no lifting of the gloom over the steel industry, as quoted by the FT.

**Florange Blast Furnace Closure**
In the beginning of October, ArcelorMittal announced the permanent closure of a part of a French plant, namely the Florange blast furnace, with the loss of 600 jobs.
“ArcelorMittal’s operating performance has been significantly impacted by the economic situation and recession in Europe,” said in a company press release Robrecht Himpe, head of ArcelorMittal’s flat steel operations in Europe. “After four years of this very difficult environment, we have regrettably concluded that given steel demand is still significantly below pre-crisis levels, we need to reconfigure our operating profile in order to strengthen the company in France and Europe to meet the ongoing challenges.”
The FT reports that Mr Mittal accepted a request by the French government to be given 60 days in which to try to find a buyer for the site. The Florange unit, however, has been considered as one of ArcelorMittal’s least competitive sites in Europe.

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