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ArcelorMittal Expands Iron Ore Investments in Brazil

08/21/2008 - ArcelorMittal will acquire 100% of the issued share capital of iron ore miner London Mining South America Limited for approximately US$764 million, and reaches agreement with Adriana Resources for development of an 80-20 iron ore port facility in the State of Rio de Janeiro, Brazil.

ArcelorMittal has agreed to acquire 100% of the issued share capital of London Mining South America Limited (London Mining Brasil) from London Mining plc for approximately US$764 million. The transaction also includes the assignment of inter-group loans from London Mining of approximately US$46 million. The total consideration payable to London Mining will amount to approximately US$810 million.
 
London Mining Brasil, an iron ore miner located in Brazil’s Iron Quadrangle, is focused primarily on the exploration, development and production of iron ore resources in the region. Its Central, Eastern and Western Claims contain an estimated 1,059 million tonnes of measured, indicated and inferred iron ore resources.
 
Iron ore from London Mining Brasil’s mine has an average Fe grade of 38.0% and contained Fe of 402.6 million tonnes under Brazilian Reporting Standards.
 
London Mining Brasil is currently in the process of expanding its annual production of iron ore concentrate and lump ore from 1.4 to 3.2 million tonnes in 2009 due to the operation of a recently commissioned sinter feed plant. Subject to further technical analyses, ArcelorMittal will consider investing up to US$700 million to increase production in the medium term to in excess of 10million tonnes/year.
 
ArcelorMittal has also reached an agreement (subject to contract) with Canadian-based Adriana Resources Inc. for the development of an iron ore port facility in the State of Rio de Janeiro, Brazil. The Port will be constructed in the City of Mangaratiba on land Adriana acquired in January 2008. ArcelorMittal intends to use its share of the port’s capacity to export iron ore from the London Mining Brasil mine to its steel facilities in the Atlantic basin.

The Port site has direct access to an extensive railway and transportation network.
 
It sits on a 771,818-m2 parcel of land in Sepetiba Bay on Brazil’s coast. Adriana expects to complete the purchase of the adjacent Lot 3 (an additional 85,757-m2 parcel) during the third or fourth quarter of 2008.
 
Permitting is underway and the site has already received Terms of Reference for environmental requirements.
 
Construction of the port facility—expected to commence as early as the fourth quarter of 2008—will take an expected 18 to 24 months to complete. The Port is expected to initially operate at a transshipment capacity of 5 to 10 million tonnes/year.
 

Under terms of its agreement with Adriana, ArcelorMittal will acquire 80% of the Port through a series of transactions for total consideration of approximately $40.5 million USD. Adriana will hold the remaining 20%. ArcelorMittal will also acquire up to 19.9% of Adriana’s common shares in two private placements, and will be granted a seat on Adriana’s Board of Directors.
 
Under the agreement, the parties will each fund their pro rata portion of the Port development costs, which are estimated to total approximately US$250 million for the first 10 million tonnes/year of capacity. The parties are to share in the Port’s capacity in proportion to their ownership.
 
“This is another important investment in the dynamic Brazilian market,” commented Aditya Mittal, Chief Financial Officer and Member of ArcelorMittal's Group Management Board. “The acquisition of London Mining Brasil along with our investment in MPP—Mineração Pirâmide Participações Ltda ensures that our iron ore base is further diversified in the face of tighter supply for raw materials.
 
“In addition,” said Mittal, “the planned port facility at Sepetiba Bay in Brazil is the ideal captive solution to deliver access to the export market for ore from the Iron Quadrangle region.”
 
RBC Capital Markets acted as the exclusive financial adviser to ArcelorMittal in respect of both transactions. Both transactions are subject to receipt of the necessary approvals.
 
ArcelorMittal is the world's largest steel company, with over 320,000 employees in more than 60 countries. The company leads a number of major global steel markets, including automotive, construction, household appliances and packaging, with leading R&D and technology, as well as sizeable captive supplies of raw materials and outstanding distribution networks. With an industrial presence in over 20 countries spanning four continents, the company covers key steel markets, from emerging to mature.
 
Through its core values of sustainability, quality and leadership, ArcelorMittal commits to operating in a responsible way with respect to the health, safety and wellbeing of its employees, contractors and the communities in which it operates. It is also committed to the sustainable management of the environment and of finite resources. The company also takes a leading role in the industry's efforts to develop breakthrough steelmaking technologies and is actively researching and developing steel-based technologies and solutions that contribute to combating climate change.
 
In 2007, ArcelorMittal had revenues of USD 105.2 billion and crude steel production of 116 million tonnes, representing around 10% of world steel output.