AAP General News (Australia)
08-22-2011
FED:OneSteel buy Peculiar Knob iron ore
By Greg Roberts
MELBOURNE, Aug 22 AAP - Steelmaker OneSteel has moved to shore up its position in the
booming iron ore industry by spending $346 million on several mines.
However, Australia's second-biggest steelmaker denied it would exit steelmaking, despite
a record high Australian dollar and raw material costs causing a crisis in the industry,
making it impossible to compete with other countries such as China.
The announcement came on the same day Australia's biggest steelmaker BlueScope spelt
the end of its export business by announcing 1,000 job cuts and the closure of a blast
furnace, following a $1.05 billion full year loss.
OneSteel said on Monday it had bought iron ore assets in South Australia including
Peculiar Knob from WPG Resources for $346 million.
It will also expand its export port facilities at Whyalla in South Australia to 12
million tonnes per annum by the fourth quarter of calendar 2012, from the current capacity
of 6.5 to 7.0 million tonnes, the company says.
The port expansion will cost about $200 million.
It's shares fell 1.5 cents, or 1.12 per cent, to $1.325 by 1136 AEST.
OneSteel's stated strategy was to grow its mining activities, chief executive Geoff
Plummer told reporters in a teleconference on Monday.
WPG Resources recently received SA government approval to develop the highly regarded
Peculiar Knob mine in the Woomera Prohibited Area.
The mine, combined with a strong iron ore market, gave him the confidence to make a
significant investment in the port, Mr Plummer said.
"This is certainly consistent with our stated strategy, which is to invest and grow
iron ore and mining consumables where we can take advantage of the far more positive outlook
in the resources space," he said.
The investment in the Whyalla port would directly and indirectly create 1,000 jobs,
he said, but that is offset by the fact that there was no guarantee the inefficient, lossmaking
steelworks there would stay open.
"If we believed that we couldn't make the steel manufacturing viable then the sorts
of things that we're talking about (shutting down steel manufacturing) would have to be
contemplated," he said.
"We believe it is in the best interests of our shareholders to address the competitive
positions of our steel manufacturing to ensure that those businesses can generate cash
rather than consume a lot of cash in closing them down."
OneSteel announced last week that it had cuts its manufacturing and distribution workforce
by 400 people, while flagging more job cuts.
The company's full-year profit was down 10.9 per cent to $230.3 million, with iron
ore earnings increasing by 57 per cent to $524 million, while the steel-making business
posted a $185 million loss.
AAP gr/dlm
KEYWORD: ONESTEEL UPDATE
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