ArcelorMittal's (
MT
) board of directors has approved the expansion of iron ore mining
capacity in Liberia from 4 million tonnes per year to 15 million
tonnes per year. This capacity will be achieved in 2015.
Recognizing the growth potential and also to hedge against
rising prices of major raw materials like iron ore and coal,
ArcelorMittal has consciously been realigning its focus on mining.
The company is projecting growth in iron ore output to 84 million
tonnes in 2015 from 56 million tonnes in 2012.
See our full analysis for ArcelorMittal
The investments will be carried out to build an iron ore
concentrator, expand the port facilities in Buchanan, and increase
utilization of rail capacity. The iron ore concentrator will be
built at the mine site in Yekapa to produce iron ore pellets which
are used exclusively by steel makers. The Buchanan port will get a
new fixed ship loader that will have a loading capacity of
6,000-8,000 metric tonnes of iron ore per hour. The company has
already invested $1 billion in the country so far, including the
money spent on construction of schools and hospitals in areas where
it operates. For the new investments approved by the board,
however, ArcelorMittal refused to provide numerical estimates.
ArcelorMittal's Iron Ore Mining Business
ArcelorMittal has a global portfolio of 16 operating units with
mines in operation and development and is among the largest iron
ore producers in the world. At the end of 2012, ArcelorMittal's
iron ore production from its own mines and through strategic
contracts stood at 68.1 million tonnes and met 61% of the company's
iron ore requirements. The production from its own mines
constituted 55.9 million tonnes of the total.
The company's main mining products include iron ore lump, fines,
concentrate and pellets. As of December 31, 2012, ArcelorMittal's
iron ore reserves were estimated at 4.3 billion tonnes. Its
long-life iron ore resources provide a measure of security of
supply and an important natural hedge against raw material
volatility and global supply constraints. Since January 1, 2011,
the mining business has become a separate reportable segment in
ArcelorMittal's financial statements. This enhances the ability to
optimize capital allocation and pursue growth plans, which include
a material increase in production and sales to third parties at
market prices.
ArcelorMittal aims to increase iron ore shipments in 2013 by
approximately 20% from the previous year's level of 28.8 million
tonnes to reach 34.5 million tonnes. This will be achieved by
expanding production at its Liberian and Canadian operations. The
Canadian operations alone are expected to yield 24 million tonnes
of iron ore in 2013. As the company expands mining capacity through
investments in lower cost operations, it expects the operating cost
per unit to come down significantly by 2015.
We have a
price estimate for ArcelorMittal of $15
, which we will soon revise to incorporate the fourth quarter
earnings results.
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