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ArcelorMittal South Africa Acquires Second-Largest Stake in Coal of Africa
04/08/2009 - ArcelorMittal South Africa announces the acquisition of ArcelorMittal Group’s 16.3% stake in mining company Coal of Africa Limited for R404.5m in cash.
ArcelorMittal South Africa announced the acquisition of ArcelorMittal Group’s 16.3% stake in mining company Coal of Africa Limited (CoAL) for R404.5m in cash. The price is based on the previous 15-day volume weighted average share price of CoAL on the JSE.
The transaction, which will secure part of ArcelorMittal South Africa’s future coal needs, also includes an option for the company to enter into an off-take agreement with CoAL for the supply of 2.5 million tonnes of metallurgical (coking) coal annually. ArcelorMittal South Africa purchased 5.2 million tonnes of coal last year, making coal one of the company’s largest input raw materials.
In addition to securing future coal supplies, ArcelorMittal South Africa believes that the quality of the coal it will procure from CoAL’s Vele Colliery Project will further enhance its management of input costs by enabling it to increase the quantity of local coal in its overall coal mix to feed its furnaces.
“This transaction ensures secure supplies of a key input material for the steelmaking process and is an important step in our strategy to pursue raw material backward integration,” said ArcelorMittal South Africa CEO Nku Nyembezi-Heita, commenting on the transaction.
CoAL is focused on the acquisition, exploration and development of thermal and metallurgical coal projects in South Africa. The company currently has three coal projects in various stages of development, including the Mooiplaats Thermal Coal Project; Vele Coking Coal Project (74% ownership); and Makhado Coking Coal Project. CoAL also owns NiMag, an alloy processing company, and Holfontein, a small coal project which is non core to the operations of the company.
ArcelorMittal South Africa’s 16.3% stake makes it CoAL’s second-largest shareholder after the 17.3% owned by Africa Management Limited, a black economic empowerment company associated with the Mvelaphanda Group.
“We welcome ArcelorMittal South Africa as a major shareholder and first customer for our coking coal products,” commented CoAL Managing Director Simon Farrell.
ArcelorMittal South Africa Limited, the largest steel producer on the African continent, produces 6.4 million tonnes of liquid steel per year. The company has a depth of technical and managerial expertise carefully nurtured since 1928, a reputation for reliability and a sharply defined business focus, which has forged the organization into a modern, highly competitive supplier of steel products to the domestic and global markets.
ArcelorMittal South Africa's global standing is further underpinned through becoming part of the world’s largest steel producer, ArcelorMittal, which has 310,000 employees worldwide. ArcelorMittal leads a number of major global 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.
