ArcelorMittal eyes Canadian iron ore stake sale: sources – by Euan Rocha (Montreal Gazette/Reuters – October 19, 2012)

Deal could potentially avoid Investment Canada hurdle

TORONTO – ArcelorMittal, the world’s largest steelmaker, is exploring the sale of a minority stake in its Canadian iron ore business, sources familiar with the situation said.

The company has retained RBC Capital Markets and Goldman Sachs to assist in the process, which has been going on for a few months, said one of the sources, adding that a deal is likely to be announced before the end of the year.

ArcelorMittal (NYSE: MT) is one of Canada’s top exporters of iron ore to steel markets around the world and its operations account for about 40 per cent of Canada’s iron ore output. It operates two large open-pit mines in the province of Quebec, where it also owns the Port-Cartier industrial complex that includes a pellet plant, storage areas and port facilities for shipping.

ArcelorMittal Mines Canada, which traces its origins back to the Quebec Cartier Mining Co., produces 15 million tonnes of iron ore concentrate and more than 9 million tonnes of iron oxide pellets annually.

The sources familiar with the situation said the stake sale process is generating a lot of interest from Asian steelmakers that are keen to lock in off-take agreements to secure their own future supplies of the raw material crucial to the steelmaking process.

ArcelorMittal had been expanding its iron ore resource base in an effort to reduce its dependence on miners like Vale SA (NYSE: VALE), Rio Tinto (NYSE: RIO) and BHP Billiton (NYSE: BHP). Last year it even acquired the huge Mary River project in the Canadian Arctic.

But the bleak economic situation in Europe and lacklustre growth in steel demand in the aftermath of the financial crisis have forced ArcelorMittal and its rivals to rethink plans. The company has been cutting steel output in Europe for more than a year, even as iron ore prices recently fell to a three-year low, as China’s slowdown hurt demand.

Despite the bleak outlook in the sector, the sources said the scarcity value of world-class producing iron ore assets and the chance to own a stake in assets in a politically safe jurisdiction make the deal attractive to potential buyers.

ArcelorMittal could not be reached for immediate comment.

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