Posco buying into WA ore project

Photo / Paul Estcourt

SEOUL - Posco will spend US$162 million ($225 million) to buy into an iron ore project in Western Australia as the world's third-biggest steelmaker seeks to cut costs and tie up new sources of raw material.

Posco will take a 24.5 per cent stake in the Australian Premium Iron project, being developed by American Metal and Coal International and Aquila Resources, says the Pohang, South Korea-based company. The reserve in Pilbara may produce 40 million tonnes a year starting in 2014, it says.

Chief executive Chung Joon Yang plans to invest US$5 billion in overseas mines, joining the world's largest steelmaker ArcelorMittal in securing its own raw material to combat price swings. Posco's Australian unit yesterday increased its shareholding in Murchison Metals to 13.91 per cent, making it the iron ore miner's largest shareholder.

The Australian Premium Iron purchase will boost Posco's iron ore self-sufficiency ratio to 34 per cent from 18 per cent, the company says. Posco will receive 9.8 million tonnes of ore a year from the mine, about a fifth of its annual needs.

Posco will buy its stake from American Metal and Coal, whose holding will reduce to 25.5 per cent. Aquila Resources will retain its 50 per cent stake.

The South Korean mill this year agreed to buy as much as 15 per cent of the Roy Hill iron ore project in Australia and a 7.8 per cent stake in a coal mine in Mozambique. Posco reported on Tuesday its second-quarter profit almost tripled.

- Bloomberg