TATA Steel raises USD 875 million to fund Corus buy

TATA Steel announced it has raised USD 725 million through the issue of foreign currency convertible alternative reference securities, which was oversubscribed by more than two times. TATA Steel also announced that the Greenshoe Option of USD 150 million was exercised. It said that “Consequently, the total size of the Foreign Currency Convertible Alternative Reference Securities Offering will increase from USD 725 million to USD 875 million."

The convertible alternative reference securities will be convertible into either qualifying securities, which may be in the form of depositary receipts with restricted rights of withdrawal representing underlying ordinary shares with differential rights as to voting or ordinary shares. The convertible alternative reference securities will be convertible at an initial conversion price of INR 876.6225 per share, which is at a premium of 35% to TAT Steel’s closing share price on the National Stock Exchange of India Limited as on August 6th 2007. The convertible alternative reference securities carry a 1% coupon and the effective YTM is 5.15%. The outstanding CARS, if any, at maturity will be redeemable at a premium of 23.3419% of the principal amount. The issue is subject to fulfillment of certain Conditions Precedent.

Citigroup acted as the sole global coordinator and book runner to the offering with ABN AMRO Rothschild and Standard Chartered Bank being the joint book runners.

With this the total offering has gone up to USD900 million. This is part of the USD 7.4 billion equity contribution to finance the Corus deal which is valued at USD 13.7 billion including debts.

The equity part, which was earlier raised by USD 700 million from USD 6.7 billion to USD 7.4 billion, is being raised by TATA Steel and its Singapore based subsidiary TATA Steel Asia.

SAIL adopts transparent system for contracting

Steel Authority of India Limited has decided to implement an Integrity Pact with bidders and vendors for all fresh purchases and contracts valued at INR 100 crores and above. The system will come into effect from August 16th 2007 and will ensure that both SAIL and bidders bear the onus of ensuring that tendering and award of contracts are done in a free and fair manner.

The pact shall also be a contractual agreement between SAIL and vendors and purchasers committing both sides to adhere to certain prescribed ethical norms. The pact also has provisions for payment of damages and other retributive actions in case any of the prescribed norms are proven to be violated.

Independent External Monitors will oversee the execution of the pact, which will help to increase transparency and provide a level playing field for both SAIL as well as bidders. In this regard, the Central Vigilance Commission has approved the appointment of Mr P Shankar former Central Vigilance Commissioner and Dr PL Agarwal former SAIL Chairman, as IEMs. The salient features of the pact have been vetted by the Additional Solicitor General of India.

SAIL has taken this significant step at a time when it is in the process of finalizing expansion & modernization projects that involve thousands of crores of rupees thus demonstrating its commitment towards enhancing transparency and accountability in its systems.

POSCO mining application returned to state

It is reported that Indian union government has returned the application of POSCO India for grant of mining lease in the state of Orissa as it was found to be incomplete. As per reports the application would be reconsidered as soon as it would be resubmitted.

The reports cited an official as saying that "We just sent it back with some directions to complete a process. It has not been rejected."

Considering the normal governmental procedures and time required to move the application, this move is likely to further delay the whole process, which may result in more delays in start of POSCO’s project

The mining lease is crucial to POSCO's plans to build a USD 12 billion steel complex in Orissa and last week, union government gave environmental clearance for the plant. However the issue of Kudremukh Iron Ore Company Limited is still unresolved in this regard.

JSW Steel may buy Jindal Saw's US plant - Report

NDTV Profit.com reported that JSW Steel is considering buying Jindal Saw's US plate mill. The report cited some inside sources as saying that Mr Sajan Jindal and Mr PR Jindal have agreed that Mr Sajjan Jindal through his flagship company JSW Steel will match the highest bid that comes in for Mr PR Jindal’s Jindal Saw's US plant.

AS per report, 2 international steel companies have already conducted due diligence on the pipe plant and will submit their bids shortly. JSW Steel is likely to start its due diligence soon. The deal which is pegged at around USD 1.2 billion is likely to close by end August.

The report cited some JSW insiders as saying that the acquisition of the plate and pipe mill will give a big push to JSW Steel’s realizations and profitability as the game plan is to export raw steel slabs from JSW Steel’s plant in Karnataka to the US facility for conversion into plates and than pipes.

Mr Sajjan Jindal vice CMD of JSW Steel in an interview on July 26th 2007 had confirmed that "We are close to buying a steel plate mill in the US.” He had however declined to comment on whether the target was a plant owned by Jindal SAW Ltd. During the interview Mr Sajan Jindal had said "The cost at the US plant can be significantly lowered if we ship the steel from India and add value there.”

India may bar 25 years plus aged ships entry

ET reported that union government is charting out guidelines to bar entry of aged overseas ships into Indian coasts and ships aged 25 years and above may soon be disallowed to dock at Indian coasts. Ships with bad track records and flags of convenience like Panama, where ships are granted certification without major checks would not be allowed. The policy is being finalized and would be announced soon.

The report cited a senior government official as saying that “The policy is currently being framed by the directorate of shipping. The ships have an average age of 17 years. The government has taken a serious view that ship, which become vulnerable after 25 months would not be entertained. The idea is to bring a threshold age for the ships. While we will target 25 year plus ships in the beginning, later even 20 year old ships will be targeted as the average age of a ship is 17 years.”

However, experts point out that the move of the government may have multi dimensional impact. Mr Bivek Anand associate director of KPMG said that “The impact on shipping companies will be in terms of the need for expediting their fleet renewal or tonnage acquisition plans, since a number of existing vessels may not qualify on the age meter, for touching the Indian coast. With the lowering of the allowable age of vessels touching an Indian port, the old vessels operating under a flag of convenience will lose the advantage and, thus, shipping companies will get naturally discouraged to register with a flag of convenience. Thus, the flags of conveniences allowing old vessels to ply will also lose out in terms of their attractiveness for registering a vessel.”

The nations associated with the flags of convenience include Panama, Liberia, Bermuda, Bahamas and many others. Some of these nations are more liberal on the scrapping age of vessels, thus allowing shipping companies to operate older vessels. According to a shipping ministry official 17,000 ships are overage in the world.

Vizag Port striving to retain top slot in 2007-08

BL quoted Mr K Ratna Kishore chairman of Visakhapatnam port as saying that Vizag Port, India’s number 1 port for the past 7 years in cargo handling, is set to handle 63 million tonnes of cargo during the financial year 2007 and would retain the top slot among Indian ports.

Mr Kishore said that the other ports were close on the heels of Vizag, but all attempts would be made to retain the top slot and with your blessings we will succeed. He added that “Vizag achieving the top slot or crossing the 50 million tonnes mark is nothing to write home about. Some of the Chinese ports handle 250 million tonnes per annum. We have to go a long way in the infrastructure sector.”

He said that it was good that the union government had formulated a national maritime policy in 2005, but certain problems would still have to be addressed. He added that “We have realized in the era after liberalization that in fixing the price of any product in the marketplace the cost plus approach would not work. We have to cut down on costs to stay competitive. A similar approach is required in fixing the tariff for the major ports and the tariff regulatory authority for major ports would have to think along those lines.”

During 2006, Vizag port handled 56.3 million tonnes. In the April to June 2007 quarter, Vizag port has handled 15.2 million tonnes of cargo as compared with 12.9 million tonnes in April to June 2006 quarter.

Mineral rich states opposing auction route for mine allocation

It is reported that India’s 5 mineral rich states Chhattisgarh, Orissa, Jharkhand, Karnataka and Rajasthan have demanded that they should have a say in the new mineral policy being considered by a group of ministers. Many iron rich states including Orissa are also opposing plans to shift from the current system of allocation of iron ore mines to an auction process.

As per report, chief ministers of the 5 mineral rich states met Mr Shivraj Patil union home minister, who is also the head of a group of ministers considering the mineral policy and wanted their voices to be heard in royalty pay outs.

Mr Raman Singh chief minister of Chhattisgarh said that “We cannot settle for just a meager 2% to 3% royalty.”

Mr Navin Patnaik chief minister of Orissa said that he wanted Dr Manmohan Singh to release details of the policy before it was placed before the cabinet.

Earlier, the group of ministers had decided that state governments would have to auction iron ore reserves and could no longer allot ore blocks to steel companies that promise to set up plants in their states. Which means that prospective steel investors would have to acquire iron ore mines through auctions instead of negotiating with state governments.

Modified version of coal e auction may restart soon

ET reported that a modified version of e auction of coal is all set to make a re entry into the market as union government is finalizing a new e auction format under which Coal India Limited would finalize a reserve price for a coal block to be offered under the electronic route. This price would be made public only after bids are opened.

As per report, the changes would be part of Coal Distribution Policy that is waiting nod from the prime minister’s office. Once the policy is approved, government may permit Coal India Limited to restart e auction of coal as early as late in 2007 or early 2008.

The report cited a spokesman of CIL as saying that “We are evaluating various options to make the new e auction of coal a more transparent process that helps in meeting the requirements of consumers. One suggestion is to replace the current system of having a floor price for coal offered under e auction route with a mechanism where reserve price is finalized, but not disclosed to customers before the bid. It is expected that this system would prevent companies from making unrealistic bids.”

The e auction of coal has been a big success ever since its start in 2004. During 2005-06, Coal India Limited sold about 20 million tonnes of coal through this route, which generated additional revenue of about INR 920 crore. Coal India Limited was planning to sell about 32 million tonnes of coal during 2006-07 but this system was replaced by an e booking mechanism following court orders. The e auction was suspended in December 2007 following observations made by the Supreme Court. The apex court had said that process was not transparent and created disparity in pricing among different sets of consumers.

Hindalco and TATA Power to form JV for coal block in Jharkhand

ET reported that Hindalco Industries and TATA Power Company would form a 70:30 JV to develop a coal block in Jharkhand that will feed both the companies’ upcoming power projects in Jharkhand. The Jharkhand government had recently allotted the mines to the two companies. The mine allotted to Hindalco and TATA Power is located in Palamau near Latehar in Jharkhand.

Birla Group is setting up its Greenfield project that includes a 350,000 tonnes per annum aluminum smelter. At present, Hindalco and Essar Power, through their JV firm Mahan Coal Company, are developing coalmines at the Mahan block of Sidhi Singrauli fields in Madhya Pradesh.

TATA Power is at present setting up an INR 3,800 crore power project of 1,000MW in Jharkhand under the Maithon Power JV it had signed with Damodar Valley Corporation in 2005. The project already has a coal linkage and the new allocation at Palamau will be used for a yet to be announced project. In 2005, TATA Power had signed an agreement with the Jharkhand government to set up facilities to generate up to 3,000MW over an unspecified time period. TATA Power is also setting up a coal based captive power plant of 750MW, with an investment of INR 2,400 crore. It has also filed an application for environmental clearance, water, construction, power and other necessary infrastructure for the project.

Steel Exchange Q1 net profit up by 524% YoY

Steel Exchange India has posted net profit of INR 30.55 million in April to June 2007 quarter up by 524.7% YoY as against INR 4.89 million in April to June 2006 quarter.

It has posted net sales of INR 1,201.88 million for April to June 2007 quarter up by 9.30% YoY while the total income for April to June 2007 quarter has climbed by 9.88% YoY to INR 1,218.55 million.

Other income during the April to June 2007 quarter is recorded at INR 16.67 million up by 78.86% YoY.

Indian Railways approves incentives to increase traffic

Indian Railways announced that it has received 326 proposals for its various freight incentive schemes, out of which 244 proposals have been approved. This will generate additional earnings of INR 305.29 crore during the current financial year. Indian Railways will also generate additional earnings of INR 177.35 crore during the current year from the incentive scheme for incremental traffic.

Union ministry of railways has formulated various freight incentive schemes to increase freight traffic and additional revenue. Under the incentive scheme for traditional empty flow direction, 48 proposals have been received by the ministry, out of which 31 have already been approved, resulting in additional earnings of INR 38.58 crore during the current financial year.

As per release, freight discount of up to 30% has been permitted on traffic loaded in the notified traditional empty flow directions during both busy and lean seasons. The railways’ long term special incentive scheme attracted 78 proposals out of which 31 have been approved, resulting in earnings of INR 50.6 crore in the current financial year.

Out of a total number of 87 proposals, 72 proposals have been approved. Another 40 proposals have been received and approved under the incentive scheme for freight forwarders. Under this scheme, the zonal railways have been delegated the power to grant concession up to 20% to the customers offering sizeable traffic.

To promote rail, road and warehousing integration and expansion of commodity basket for Indian Railways, composite freight rates have been offered to freight forwarders for loading in covered and BOXN wagons. This will bring additional earnings of INR 10.82 crore during the current financial year. Under the incentive scheme for two legs, 73 proposals, 70 proposals have already been approved.

Union ministry of railways has instructed all zonal railways to make all these schemes more popular to get more and more traffic from road to rail.

Alahknanda Hydro achieves financial closure

GVK Group announced that its Alakananda Hydro Power Company Limited has achieved financial closure for its 330MW Shrinagar hydroelectric project to be set up in Uttarakhand.

Mr A Issac George CFO of GVK Power & Infrastructure Limited said that “The capital cost of the project is estimated to be INR 2,069 crore, which will be funded through a debt equity ratio of 80:20. The debt component of INR 1,655 crore is funded by infusion of INR 1,494 crore and INR 161 crore as dollar component, raised through foreign currency convertible bonds coordinated by Axis Bank. The project will have equity of INR 414 crore.”

Alakananda Hydro Power Company Limited is implementing the project in pursuant to an implementation agreement signed in February 2006 with the Uttar Pradesh and Uttarakhand governments. Bharat Heavy Electricals Limited has been awarded the electro mechanical works and the plant will be ready for commercial operations by early 2011.

The power purchase agreement for the project was signed in June 2006 with Uttar Pradesh Power Corporation Limited valid for 30 years. As per the power purchase agreement, Uttar Pradesh Power Corporation Limited has agreed to purchase 88% of the energy generated by the Shrinagar Power Project while, the remaining 12% would be supplied free to Uttarakhand. Its levelised tariff is INR 2.11.

GVK has set up India’s first independent power project, the 217MW Jegurupadu combined cycle power plant in Andhra Pradesh. It has invested over INR 5,000 crore into infrastructure projects and has on hand projects in the pipeline of over INR 13,000 crore.

Baosteel, Nippon & ArcelorMittal’s JV may undergo expansion

Interfax China reported that Baoshan Iron, Nippon Steel Corporation and Arcelor Mittal’s automotive steel sheet JV company Baosteel Nippon & Arcelor Automotive Steel Sheets Corporation Limited may undergo expansion.

As per report, the consortium will decide as early as next month whether or not to construct an automotive steel sheet plant through the existing JV. The steel makers are expected to invest between JPY 1.5 billion (USD 12.63 million) and JPY 20 billion (USD 168.48 million) in order to expand the JV.

A Nippon official said that "Nippon Steel Corporation is considering expanding Baosteel Nippon & Arcelor Automotive Steel Sheets Corporation Limited, although nothing concrete has been decided on as yet."

An Arcelor Mittal official said that "A detailed expansion plan was not nailed down at the recent Baosteel Nippon & Arcelor Automotive Steel Sheets Corporation Limited shareholder meeting, but will hopefully be decided upon mid next month."

Baosteel Group officials were unavailable for comment when reached by Interfax.

Baosteel Nippon & Arcelor Automotive Steel Sheets Corporation Limited was established in 2004 with a total investment of CNY 6.5 billion (USD 858.77 million) and specializes in the manufacture and sale of cold rolled steel sheet and coated steel sheet mainly for the automotive industry. Baosteel Group is the largest shareholder in the JV with a 50% stake, while the Nippon Steel holds a 38% stake and ArcelorMittal the remaining 12%.

Tenaris Q2 net sales up by 41% YoY

Tenaris SA announced that its April to June 2007 quarter results rose from a year earlier, with rest of the world operations offsetting a sharp fall in Canadian drilling activity.

April to June 2007 quarter net rose by 8% YoY to USD 534.5 million, operating was up by 13% to USD 780.4 million, EBITDA up by 22%YoY to USD 910.7 million and sales up by 41% YoY to USD 2.604 billion.

(In USD million)

Tenaris SA said that the positive operating context in the rest of the world has compensated for the significant cut in drilling activity in Canada. It added that “We continue to make progress in integrating activities in North America and in the positioning of our commercial offerings for the entire range of products.”

Tenaris said that in April to June 2007 quarter number of Canadian drilling plants fell by 51%YoY more than the usual seasonal trend, reflecting regional drilling prices for gas. In the US, drilling activity rose by 1%QoQ and was up by 8% YoY. It added that “With gas prices in north America continuing to fall, any pick up in the drilling activity in Canada in the second part of the year will probably be limited. All the same, in the rest of the world, demand remains stable, given that oil and gas operators continue to increase their investments in exploration and production activities.”

Tenaris said that “Higher raw material and energy costs have increased cost of steel production during the year, affecting the second quarter.”

Vietnam government likely to cut steel import duties in August

It is reported that the Vietnamese government is likely to lower import duties on steel. Sources said that the import duty cut would probably be 2% to 3%. The report added that the cut would take place for certain products with effect from August 8th 2007. But currently no official announcement has been made.

Followings are the list of tentative duty cut for certain products.
1. Billet import duty from 5% to 2%
2. Construction steel long product import duty from 10% to 8%
3. Metallic and color coated steel product import duty from 12% to 10%
4. Cold rolled coil import duty from 7% to 5%

Mr Nguyen Tan Dung prime minister of Vietnam at a weekend meeting of his new cabinet, instructed ministers to curb inflation after consumer prices rose 0.94% last month, taking the inflation rate so far this year to 6.19%. The Saigon Times reported that to reduce the rising costs of a range of products, Vietnam will this week cut import tariffs on many food and dairy products as well as on steel and building materials.

Xstrata to purchase Iluka 50% stake in Narama coal mine

Xstrata Coal announced its intention to purchase Iluka Resources Limited’s 50% interest in the Narama thermal coal mine located in the Hunter Valley of New South Wales. Xstrata Coal has agreed to acquire Iluka’s 50% interest for approximately AUD 53 million subject to any final completion adjustments. Xstrata Coal will also take over all marketing, workforce and environmental obligations.

The Narama mine is located approximately 25 kilometer northwest of Singleton within the Hunter Valley of NSW. Narama produces approximately 2.5 million tonnes of saleable thermal coal per annum. Narama Mine is a 50:50 JV between Ravensworth Operations Pty Limited, a wholly owned subsidiary of Xstrata Coal Pty Limited and Iluka Resources Limited. The mine is operated by Xstrata Coal.

Mr Peter Coates CEO of Xstrata said that “The purchase of Iluka’s 50% interest in the Narama operation enables Xstrata to create value from the further consolidation of our interests in the Hunter Valley. Xstrata Coal will remain the operator of the mine and will ensure that Narama continues to meet the high productivity, health, safety, environmental and community standards expected of our operations. The transaction will not affect any day to day operations or our workforce.”

NLMK Group declares Q2 results for major companies

Novolipetsk Steel has announced its Q2 2007 financial results for the Groups major Russian companies as per Russian Accounting Standards.

NLMK’s financial results improved in April to June 2007 quarter compared to January to March 2007 quarter due to strong pricing environment. Average steel prices in April to June 2007 quarter were higher than the level of January to March 2007 quarter and April to June 2006 quarter. This was the primary factor contributing to the increase of sales revenue during the reporting period. The profit increase in April to June 2007 quarter compared to the previous quarter is also attributable to price increases for iron ore raw materials, coking coal concentrate and energy, which were fixed until the end of 2007, as well as the strong pricing environment. The gross profit and net income in April to June 2007 quarter increased by 15.7%QoQ and 11.8%QoQ respectively in comparison with January to March 2007 quarter.

NLMK Steel
The substantial price increase of basic raw materials in April to June 2007 quarter compared to April to June 2006 quarter resulted in growing costs of goods sold at the main production site in Lipetsk and corresponding slight lowering of financial results compared to April to June 2006 quarter. The growth of cost of goods sold was primarily caused by the price increase of iron ore raw materials, which are mostly supplied by Stoilensky GOK. The financial results slightly deteriorated compared to the previous quarter due to the reduction of iron ore raw materials supply from Stoilensky GOK to the main production site in Lipetsk at the stable price level. The reduction was caused by temporary underperformance of the blast furnace No 6.

(In RUB thousands)

Viz stal
VIZ Stal sales revenue in April to June 2007 quarter compared to January to March 2007 quarter went up by RUB 614.2 million or up by 14.7% QoQ due to growing sales volume as well as price increase on grain- and non-grain-oriented steel in May 2007. The sales revenue growth in April to June quarter 2007 of RUB 1.1 billion or up by 29.2%YoY compared to April to June 2006 is primarily attributable to the strong pricing environment and increased sales volumes.

(In RUB thousands)

Stoilensky GOK
The sales revenue at Stoilensky GOK in April to June 2007 quarter compared to April to June 2006 increased by RUB 2.1 billion or up by 65.1%YoY due to a strong pricing environment and growth of sales volumes. The price increase of iron ore raw materials resulted in gross profit and operating profit growth in April to June 2007 quarter compared to April to June 2006 quarter by 105.8%YoY and 115.3%YoY respectively.

(In RUB thousands)

Altai-koks
The financial results increase in April to June 2007 quarter compared to the previous quarter is primarily attributable to favorable market conditions and the growth of coke sales volumes. The growth of Altai-koks financial results in April to June 2007 quarter compared to April to June 2006 quarter primarily resulted from putting into operation new coke battery №5 at the end of 2006.

(In RUB thousands)

OJSC TMTP
The financial results at OJSC TMTP decreased in April to June 2007 quarter compared to January to March 2007 quarter and April to June 2006 quarter. The decrease of financial results is primarily attributable towards the drop in USD to RUB exchange rate. The USD to RUB exchange rate fluctuations have a substantial impact on sea port financial results because freight turnover tariffs are regulated by the Russian governmental agencies and fixed in US dollars. The additional factor contributing to the decrease of financial results is a declining dry freight turnover due to labor disputes between employees and seaport administration.

(In RUB thousands)

LLC NTK
The growing volume of logistics and transportation services in April to June 2007 quarter compared to April to June 2006 quarter resulted in improved financial results. The additional factor contributing to favorable financial performance is the utilization of company owned railcars since September 2006. This approach enabled OJSC “NTK” to cut railcars usage fees paid to Russian Railways and thus decrease transportation costs. The stable financial results in April to June 2007 quarter compared to the previous quarter are primarily attributable towards additional costs caused by scheduled maintenance of company owned railcars during the reporting period.

(In RUB thousands)

Territory postpones revised bid for ConsMin and to meet Privat

Territory Resources said that it had cancelled plans to launch a revised takeover bid for Australian manganese miner Consolidated Minerals and will instead meet with Ukrainian group Privat Group next week.

Mr Michael Kiernan chairman of Territory on the sidelines of the Diggers and Dealers forum in Kalgoorlie said that the company was planning to launch a revised bid but that appearance of Privat on the ConsMin share register had put it on hold. He added that the company would likely launch a revised bid within two weeks after meeting with Privat. Mr Kiernan said that "I am traveling next week to meet with the Ukrainian group. I and DECOmetal will in fact meet with Privat to see what's in their mind. I am not sure what's in the Ukrainian's mind, they have said to our Austrian friends DECOmetal they are supportive of our proposal, they are not supportive of Pallinghurst."

Privat secured a 13.5% stake in ConsMin, casting a shadow over the takeover tussle being played out by Territory and a consortium led by Pallinghurst Resources. Privat's stake effectively blocks a compulsory acquisition of the manganese and nickel miner. Austrian commodity trader DECO metal is a significant shareholder in ConsMin and a backer of the Territory bid. ConsMin board has recommended the Pallinghurst offer of AUD 3.30 cash per share, which is valued at AUD 752 million.

Privat owns steel, energy, chemical, banking and media assets in Russia, Ukraine, Romania and the United States.

Evraz acquires 56% of Highveld shares

Evraz Group SA announced that it has now holds about 56.01% of South African steel producer Highveld Steel & Vanadium Corporation after its offer to buy the remaining shares received acceptances for about 1.89% of the entire issue.

Evraz, already a majority shareholder in Highveld, added that it would hold about 80.9% after the execution of an option to buy a 24.9% stake from Credit Suisse International.

The option is to be executed before October 1st 2007.

Tenaris to push for trade action on Chinese pipes in US

Thomson Financial cited Mr Carlos Condorelli CFO of Tenaris SA as saying that a trade case against subsidized Chinese exports of standard steel pipes to the US is being filed before the International Trade Commission.

Mr Condorelli during a conference call told analysts that “As an industry, we are not happy to see China taking an important share of the US market via subsides. A trade case against standard pipes is being filed.”

He also said that pipe makers are also evaluating options about the oil country tubular good pipes.

Tenaris, which makes steel tubes mainly for the oil and gas sector, recently increased its exposure to North America by acquiring Maverick Tube Corp and Hydril Company steel tube companies.

Xstrata H1 profit increased to USD 3 billion

Xstrata has announced its January to June 2007 results. Highlights of the results are as under

1. Successful integration of three major acquisitions by the end of 2006 added USD 3.1 billion to first half EBIT of USD 4.7 billion
2. Attributable profit up by 47% over pro forma results for the first half of 2006 to USD 3 billion, boosted by higher prices for nearly all of Xstrata’s commodities
3. Operational efficiencies and improved productivity delivered real cost savings of USD 71 million despite continued cost pressures
4. Free cash flow of USD 3.4 billion reduced net debt to USD 10 billion with gearing falling to 31% at the end of June
5. Exceptional suite of Greenfield and Brownfield organic growth projects with projected capital requirement of USD 28 billion, of which USD 4.5 billion is already approved
6. Strategic business review at Collahuasi copper operation has identified the potential to increase production to one million tonnes per annum in two stages
7. Global demand for commodities remains very strong, led by China and increasingly India, while supply constraints remain evident across the industry

Mick Davis CEO of Xstrata said that “Xstrata’s record financial performance in the first half of 2007 clearly demonstrates the immediate and significant earnings accretion achieved through the three major acquisitions completed in 2006. The acquired operations provided exposure to nickel, at a time when average prices rose to over USD 40,000 per tonne, enabled Xstrata to capture additional benefit from stronger thermal coal, copper and zinc prices and contributed USD 3.1 billion of earnings before interest and tax to first half earnings of USD 4.7 billion. Attributable profit rose to USD 3 billion, 47%YoY higher than the pro forma result in the first half of 2006.”

BHPB to provide materials for Olympic medals

BHP Billiton announced that raw materials mined in Australia and Chile will be used to produce the medals for the 2008 Olympic and Paralympic Games at Beijing in China. BHP said that the company’s Cannington mine at Queensland in Australia and its Escondida and Spence operations in Chile will provide the materials needed to produce the gold, silver and bronze medals for the Games.

Cannington will supply the silver that is used in the production of both the gold and silver medals. Escondida will supply copper concentrate, which will contain the gold for the gold medals, while Spence will provide copper cathode that is used to produce the bronze for the bronze medals. The materials will be shipped from both countries to the China Banknote Printing and Minting Corporation in Shanghai where the medals will be created.

Mr Chip Goodyear CEO of BHP Billiton said that the announcement highlighted the company’s world class diversified asset base. He added that "As the Official Diversified Minerals and Medals Sponsor of the Games, we are proud to be supporting Beijing 2008. The Games present us with many unique opportunities including the chance to showcase our position as the world’s largest diversified minerals company and our continued support for China’s long term development and its emerging role in the international community. Our sponsorship also allows us to illustrate the alignment between the Olympic ideals and BHP Billiton’s Charter Values.”

Mr Goodyear added that a determining factor in selecting the assets for the project was the ability to involve as many BHP Billiton employees as possible. He said that "While many of our employees around the world will participate in the Olympic effort, our employees in Chile and Australia have the opportunity to directly contribute to the Olympic program."

6 miners trapped in Utah coal mine

It is reported that crews in Utah are working feverishly to try and save the 6 miners who were trapped in a coalmine on Monday. The miners are about 1500 feet below the surface. The mine collapsed early Monday morning. As per report one rescue team Monday got within 1700 feet of the men, but could not find a passable route. Trapped miners are reported to have enough water and oxygen to last them several days if they are still alive.

The trapped miners were believed to be in a chamber 3.4 miles inside the Crandall Canyon mine. Rescuers were able to reach a point about 1,700 feet from that point before being blocked by debris.

Mr Robert E Murray chairman of Murray Energy Corp said “At that point we will know whether they're alive or dead. I am disappointed with our progress in getting access to these trapped miners.” He said that “Even if rescuers get access to the men, who have been trapped for more than 30 hours, the 2 inch holes would only be large enough to get food and air to them. We have only moved 310 feet closer to these miners from where we started. We only achieved 50 feet on Monday night because of geo technical problems and technical problems that forced us out of the mine.”

Mr Murray insisted that an earthquake caused the cave in and angrily denied that a mining method called retreat mining had a role. He said that “The damage in the mine was totally unrelated to any retreat mining."

The Crandall Canyon mine is built into a mountain in the rugged Manti La Sal National Forest, 140 miles south of Salt Lake City, in a sparsely populated area.

Herbinger challenges proposed buyout offer of Ryerson

Harbinger Capital Partners Master Fund I Ltd and Harbinger Capital Partners Special Situations Fund LP announced that they sent a letter to the stockholders of Ryerson Inc urging them to elect new directors to the Ryerson board of directors at the August 23rd 2007 annual meeting of stockholders.

Mr Larry Clark MD of Harbinger Capital Partners, said that “With the announcement of the proposed Platinum Equity transaction, we believe the need for new leadership for Ryerson is even more compelling today than when we began this effort in January of this year. The current Board of Directors and senior management have consistently under performed and we believe that this management team is no better equipped to conduct an effective review of strategic alternatives than they have been to drive operational performance and profitability. As Ryerson's largest stockholder, we are concerned that the Platinum Equity transaction is the result of a flawed process and may not represent the best course for maximizing shareholder value.”

He added that “We believe it is imperative that Ryerson’s stockholders elect directors who are experienced, independent and committed to ensuring Ryerson stockholders receive full and fair value for their investments. Our nominees, working within the terms of the merger agreement with Platinum Equity, can objectively evaluate the merits of the current transaction, as well as additional offers that may arise, and are prepared to set the Company on the right course if the Platinum Equity transaction is not completed.”

Ryerson, which put itself up for sale earlier this year under pressure from activist investors in July, agreed to be sold to private equity firm Platinum Equity for slightly more than USD 1 billion.

Nisshin Steel & Baosteel JV to produce SS pipes at Ningbo

Nisshin Steel and Baosteel will jointly produce stainless pipes used as vent pipe for automobile. The plant will be erected at Ningbo in Zhejiang Province with production slated for January 2008.

The JV will source feedstock from Ningbo Baoxin Stainless the JV will produce pipes for Japanese invested automakers with an estimated capacity of 10,000 tonnes per annum.

(Sourced from MySteel.net)

Xstrata Alloys announces USD 1 billion offer for Eland Platinum

Xstrata Alloys and Eland Platinum Holdings Limited announced that Xstrata has notified the Board of Eland of its firm intention to make an offer to acquire the entire issued share capital of Eland. Xstrata has secured irrevocable undertakings of support from 51% of shareholders including directors and management. The companies have entered into a scheme implementation agreement to support and guide the successful execution of the transaction.

The offer is being made by way of a scheme of arrangement for a total cash consideration of approximately ZAR 7.525 billion (USD 1 billion) equivalent to ZAR 105 per share, which will be financed through the Xstrata Group’s existing cash resources. The Offer Price represents a premium of 18% to the closing share price of Eland on April 11th 2007. Xstrata will also acquire an additional 9% interest in the Elandsfontein Project for an additional consideration of ZAR 100 million (USD 14 million) increasing Xstrata’s attributable interest to 74% in the project.

The offer is subject to various regulatory and other approvals, including acceptance by not less than 75% of Eland shareholders who are represented and vote at the Scheme meeting as well as South African High Court approval. The scheme implementation agreement between the companies provides for inter alia a break fee of 1% of the total consideration, a non solicitation obligation and provisions in respect of the management of the business.

Highlights of the offer are
1. Cash Offer of ZAR 7.525 billion (USD 1 billion)
2. Premium of 14% to the current 30 day volume weighted average price
3. Majority support of shareholders 51% irrevocable undertakings obtained
4. First PGM concentrate due in October 2007 pipeline of growth potential
5. Platform to grow Xstrata’s PGM exposure leverages Xstrata’s mining and smelting expertise

The Elandsfontein Project is a shallow 183 million tonnes UG2 resource with an estimated 22.7 million ounces of platinum, palladium, rhodium and gold. Mining of the opencast ore started in January 2007 and production of the first PGM concentrate is expected in October 2007. Underground mine development will start in December 2007 and a conservative build up is planned to phase out the open cast material to a steady state production of ca.176,000 platinum ounces and 280,000 4E PGM ounces. The mine and infrastructure is further designed to double existing production capacity, which Xstrata plans to accelerate.

Mr David Salter MD of Eland said that “We believe the cash offer represents the culmination of Eland management’s continued promise to deliver exceptional value to shareholders, and once the Scheme is approved by shareholders, a very attractive opportunity for them to realize substantial growth in their investment over a very short period of time.”

Mr Peet Nienaber CEO of Xstrata Alloys said that “Xstrata’s offer for Eland marks the fulfillment of our next step in our strategy to further our position in the platinum group metals sector, building on the foothold established through our interest in the Mototolo Joint Venture. We believe that Eland’s production of concentrate in the very near term and strong growth pipeline provide an ideal platform from which to grow a world class PGM business. We believe this cash offer represents excellent value for Eland shareholders, while providing Xstrata’s shareholders with strong growth opportunities in an attractive commodity.”

MMX Corumba receives Pig Iron plant operating license

MMX Mineracao e Metalicos SA announced that its wholly owned subsidiary, MMX Metalicos Corumba Limited has been awarded the competent operating license which enables it to initiate industrial operation of its Pig Iron Plant at Corumba in Mato Grosso do Sul.

MMX said that the license was granted by the Environmental Institute of Mato Grosso do Sul of the State Ministry of Environment, Cities, Planning, Science and Technology.

MMX Corumba commenced the pre operation of its first blast furnace and the first commercial quality pig iron is expected for August 10th 2007.

Severstal gets EUR 500 million loan from EBRD

It is reported that the European Bank for Reconstruction and Development will lend up to EUR 500 million to steel major Severstal to help fund an energy saving program.

European Bank in a statement said that "It is estimated that the investment program would reduce Severstal’s primary energy consumption by 5% to 10% compared to existing operations, with environmental benefits through CO2 emissions reduction in the order of 600,000 tonnes per annum."

Trustee sought for Mittal Steel Sparrow Point sale

UPI reported that US Justice Department has asked a federal judge to appoint a trustee to sell a Mittal Steel US’s Sparrow Point plant after Mittal Steel failed to do so in a timely manner. US Justice Department in a news release said that Mittal Steel had agreed to sell its Sparrows Point facility near Baltimore to Bethlehem Acquisition Company a joint venture led by Esmark Inc but failed to do so before Monday's deadline.

It said “But because the deal wasn't completed by a court ordered August 6 deadline and can't be concluded for at least two months appointment of a trustee is warranted to ensure that a sale, preferably to the Esmark group, occurs.”

Mr Thomas O Barnett assistant attorney general in charge of the US Justice Department said that “The prompt divestiture of Sparrows Point is important to preserve competition in the market for tin mill products in the eastern United States. We are disappointed that Mittal has failed to complete a sale within the time prescribed by the consent decree."

Mr William Steers spokesman of Mittal Steel USA said that the development was expected. He said "The appointment of the trustee is because the deal was signed but not closed before the deadline. We are confident that we will reach a successful completion."

The sale was necessary for Mittal Steel to acquire Arcelor. The Justice Department said the acquisition, as originally proposed, was anti competitive. Arcelor and its subsidiary provided competitive pricing that likely would have been lost if the proposal went through as originally offered. The sale was a condition of a consent decree in which Mittal Steel would sell a steel mill that provides tin mill products in the eastern United States.

ThyssenKrupp, EON and RWE AG agree on shareholdings in coalmines

ThyssenKrupp, RWE and EON announced that they came to an agreement with the foundation RAG Stiftung to sell their shares in the RAG Aktiengesellschaft to the RAG Stiftung.

The three shareholding companies hold a total of 90% of the share capital. The blocks of shares are expected to be transferred on November 30th 2007 for a symbolic price of EUR 1 each.

The three RAG shareholding companies have taken this step to support the further implementation of the concept agreed upon between the federal government and the coal producing states of North Rhine Westphalia and the Saarland regarding their exit from subsidized German hard coal mining.

The shareholding companies commissioned Ernst & Young of Düsseldorf to provide a detailed valuation of the RAG shareholding in the form of an expert report.

Mechel announces new management board

Russian Mechel OAO announced that the members of the management board were elected at a meeting of board of directors that was held right after the general shareholders' meeting.

The Management Board now includes
1. Mr Igor Zyuzin CEO of Mechel OAO
2. Mr Alexey Ivanushkin COO of Mechel OAO
3. Mr Stanislav Ploschenko acting CFO of Mechel OAO
4. Mr Victor Trigubko senior VP government relations of Mechel OAO
5. Mr Arkady Germansky CEO of Mechel Energo OOO
6. Ms Irina Ipeeva general counsel and director of department of corporate management & property of Mechel OAO
7. Mr Oleg Korzhov director of planning and budgeting department of Mechel Management OOO
8. Ms Tatyana Kalyadina chief accountant of Mechel OAO
9. Ms Elena Mironova director of department of commercial and international corporate affairs of Mechel OAO
10. Mr Evgeny Mihel director of government relation’s department of Mechel OAO
11. Mr Alexander Proskurin CEO of Mechel Trade House OOO
12. Mr Oleg Rosenberg deputy CEO of foreign trade of Mechel Management
13. Ms Elena Tuvaeva first deputy CEO of Mechel Management OOO

Mr Igor Zyuzin was elected as chairman of the management board and Mr Alexey Ivanushkin, Mr Stanislav Ploschenko and Mr Victor Trigubko were elected as deputy chairman of management board.

The board of directors also approved the membership of acting committees, audit committee, appointment & remuneration committee and investment & strategic planning committee.

Metal Management acquires assets of Universal Recycling

Platts reported that Metal Management Inc has completed the acquisition of substantially all of the assets of privately held Universal Recycling, an Indiana based scrap processor and demolition services provider.

The acquisition is being funded from borrowings under the company's current credit line where terms of the transaction were not disclosed.

Universal Recycling with operating facilities at Gary in Chesterton and La Porte also specializes in roll off containers and demolition and processing equipment such as mobile cranes. The company processes approximately 80,000 long tonnes of ferrous and 10 million pounds of nonferrous scrap annually.

Mr Daniel W Dienst CEO of Metal Management Inc said that "Universal Recycling is a great addition to our already strong presence in the Midwest region."

Sundance Resources raise AUD 10 million from AMCI

Sundance Resources Limited announced that it has secured the backing of another key strategic investor to support its growth plans in the international iron ore industry following completion of a AUD 10 million share placement comprising 25 million shares at 40 cents per share to AMCI and the Triangle Resources Fund LP a global resources fund backed by the principals of AMCI.

The share placement to Triangle Resources Fund complements the recently concluded AUD 50 million share placement underpinned by Sundance’s largest shareholder, Talbot Group Holdings and Western Australian based investor the Sarich Group. The placement further strengthens Sundance’s balance sheet and increases its cash reserves to approximately AUD 83 million.

The additional funds raised through the placement will further reinforce Sundance’s strategic focus on expanding the resource definition program at the Company’s 90% owned Mbalam Iron Ore Project at Cameroon in West Africa.

Mr George Jones chairman of Sundance said “This significant strategic investment follows my recent site visit to the Mbalam Iron Ore Project where I was accompanied by a senior AMCI geologist. The investment by Triangle Resources Fund in Sundance is a strong endorsement of our long term vision for the Mbalam Project and the potential of the region as an emerging iron ore province of global significance. He added that together with Talbot Holdings, the Sarich Group and the other institutions and strategic investors who have supported us to date, the principals of AMCI and Triangle Resources Fund share our enthusiasm for the Mbalam Project and support our view that early definition of substantial resources at Mbalam will expedite evaluation and development of the project.”

Sundance Resources Ltd is an Australian company focused on mining interests in the Republic of Cameroon, on the central west coast of Africa. Sundance has commenced a pre feasibility study on its 90% owned Mbalam Iron Ore Project in Cameroon as the basis for a substantial international iron ore business.

US weekly steel production down by 1.3 % YoY

American Iron & Steel Industries reported that in the week ending August 4th 2007, US’s raw steel production was 2,058 million net tons while the capability utilization rate was 87.0 %. Production was 2,086 million net tons in the week ending August 4th 2006 while the capability utilization then was 88.7%. The current week production represents 1.3 % YoY decrease from the same period in 2006.

Production for the week ending August 4th 2007 is down by 0.9% from the previous week ending July 28th 2007 when production was 2,078 million net tons and the rate of capability utilization was87.8%.

Adjusted YTD production through August 4th 2007 was 62,691 million net tons at a capability utilization rate of 85%. That is a 5.7% YoY decrease from the 66,545 million net tons during the same period 2006 when the capability utilization rate was 90%.

AISI’s estimate is based on reports from companies representing about 75% of the US’s raw steel capability and includes revisions for previous months.

Fire reported at Nucor steel plant

It is reported that operations will resume Tuesday morning at the Nucor Steel Plant after an electrical fire knocked power out Monday night.

A Nucor representative said that there was an equipment malfunction in an electrical switching station. The fire was contained within the cinderblock structure where it started and workers began restoring power late Monday evening.

Nucor officials said that it was not an explosion and no Nucor employees were injured in the electrical fire.

Steel import applications in US cross 3 million ton in July

American Iron and Steel Institute, based on Steel Import Monitoring and Analysis data, has reported that steel import permit applications for the month of July 2007 totaled 3.03 million net tons down by 4% from the 3.17 million net tons recorded in June 2007, a 5% increase from the June preliminary imports total of 2.88 million net tons and 13% greater than the 2005 monthly average.

Import permit tonnage for finished steel in July 2007 was 2.32 million net tons up by 1% MoM from the preliminary imports of 2.29 million net tons in June 2007 and 11% higher than the monthly average of 2.09 million net tons in 2005.

For July 2007, the largest volumes of import permit applications for finished steel outside of North America are

Volume in tons

Mr Andrew G Sharkey III president & CEO of AISI while analyzing the SIMA data for July 2007 said that “The continued high import levels in the face of softening market demand remain a concern. In addition, this concern is magnified by the fact that China, which has enormous excess capacity, is maintaining high export levels to the US market. In this environment, strict enforcement of US trade laws is critical.”

AISI's estimate is based on reports from companies representing about 75% of the US raw steel capability and includes revisions for previous months.

Fosun to acquire 60% stake in Hainan Steel Limited

Interfax China reported that China’s Fosun Group would purchase a 60% stake in Hainan Iron and Steel Corporation Limited and carry out a restructuring project. It may be noted that the long awaited framework agreement was signed in June 2007 after 3 years of preparation for the Hainan Steel restructuring project and development plan.

Hainan Steel is a major iron ore supplier to Chinese steel makers including Baosteel and Wuhan Iron & Steel Corporation Limited. Despite undergoing a name change from Hainan Iron Ore to Hainan Steel more than a decade ago, it has been unable to acquire any steel plants to date. Hainan Steel previously planned to construct a steel plant in 1993, but the plan was aborted in the early stages.

According to a report by Xinhua news agency, Fosun has pledged to transform Hainan Steel into an integrated steel maker, focusing on mining in China’s Hainan Province and to reduce the environmental impact through a restructuring project.

Mr Zhu of Fosun said that " Some time has already passed since we inked the framework agreement with Hainan Steel and we hope to get the restructuring project underway as soon as possible. Fosun will inject CNY 900 million to acquire 60% in the restructuring project, while Hainan Steel will hold the remaining 40%."

Fosun Group initiated talks to purchase part of Hainan Steel in 2005 with the aim of developing both the steel and real estate industries on the island province of Hainan.

Corus Engineering Steels to increased base price

It is reported that Rotherham based Corus Engineering Steels will be increasing base prices on its specialized product range by GBP 25 per tonne.

These increases will apply to carbon, alloy and stainless grades and will apply to carbon, alloy and stainless grades and would take effect on all planned deliveries from July 2nd 2007.

Corus is Europe's second largest steel producer with revenues of EUR 9.7 billion and crude steel production of 18.3 million tonnes in 2006, primarily in the UK and the Netherlands. It is a subsidiary of TATA Steel. With a combined presence in nearly 50 countries, TATA Steel including Corus has 84,000 employees across five continents and a pro forma crude steel production of 27 million tonnes in 2007.

Xiangtan Steel to supply SBQ plates to CSSC

It is reported that China State Shipbuilding Corporation signed strategic cooperation agreement with Hunan based Xiangtan Steel on August 2nd 2007. Listed among China State Shipbuilding Corporation major shipbuilding plate suppliers, Xiangtan Steel will provide 300,000 tonnes of shipbuilding plate every year.

Xiangtan Steel is famous for its wire rod and rebar. In 2005 in virtue of investment of CNY 5 billion it entered wide and heavy plate field and aimed at medium and high end products covering shipbuilding, pressure vessel, automobile, bridge and so on. The shipbuilding plate has received authentications from classification societies in 9 major shipbuilding countries.

In this June the China State Shipbuilding Corporation got permission to produce all kinds of shipbuilding plate. Besides, its construction steel plate and bridge steel plate are used in the new base of CCTV and Nanjing Dashengguan Yangtze River Bridge respectively.

Plate has become China State Shipbuilding Corporation most competitive product with highest added value. Price for medium plate averaged below CNY 4500 per tonnes in this July yet sale price for Xiangtan Steel's plate registered nearly CNY 60000 per tonnes or even over CNY 10,000 per tonnes for some varieties. According to Mr Liu Jie GM of China State Shipbuilding Corporation said that in the H1 of 2007 Xiangtan Steel realized profit of CNY 700 million about 60% of which is contributed by medium and heavy plate.

(Sourced from MySteel.net)

Nucor to revamp its EAF at Jackson

It is reported that Pittsburgh based Core Furnace Systems has recently been contracted by Nucor Steel to convert an electric arc furnace at it's Jackson in Mississippi mini mill from a conventional tapping design to an eccentric bottom tapping operation. The project will be carried out in 2008.

Core stated that the changes will improve make scrap melting more efficient and more reliable. The revamp at Jackson involves installing a new lower shell, a kingpin superstructure, tilting platform, retractable maintenance platform, electrode columns, and roof-lift mechanism, and various other components to make bottom tapping possible.

Core Furnace Systems designs and supplies melt shop equipment, as well as thermal systems for reheating, heat treating, specialty and carbon steel process furnaces and technical service and automation systems.

Quebec accepted Alcan acquisition by Rio Tinto subsidiary

Quebec government announced that it has accepted the conclusions of the board of directors of Alcan with respect to the proposed acquisition of Alcan by a subsidiary of Rio Tinto and has confirmed that Rio Tinto's offer respects the terms of the continuity agreement between Alcan and the Quebec government, signed in 2006 as part of a USD 1.8 billion investment program for the Saguenay Lac Saint Jean region.

Mr Tom Albanese CEO of Rio Tinto said that "This decision by the Quebec government underscores the shared values of Rio Tinto and Alcan, including our dedication to environment, health, safety and local communities. As we move forward together, we are confident that the continued and expanded commitments to Quebec will ensure sustainable growth for the Province's aluminum industry. Rio Tinto has been an investor in Quebec and Canada for decades and is committed to growing the combined Rio Tinto Alcan presence, particularly in Quebec. The announcement by Quebec government means we have satisfied one of the conditions of our offer, and brings completion one step closer."

Mr Dick Evans president & CEO of Alcan Inc said that "We are very pleased that Quebec government agrees that the proposed transaction with Rio Tinto will maintain Alcan's commitments to the province. The continuity agreement was a reflection of the outstanding partnership Alcan has historically enjoyed with Quebec government and communities. Ensuring that this partnership continues for decades to come was vitally important to Alcan and a key element in our deliberations as to the right course for our company. We are excited by the opportunities that Rio Tinto Alcan represents, and that Québec will serve as home base to the world's leading aluminum business."

Meanwhile, for the purposes of the continuity agreement, Alcan agreed that in the event of a proposed acquisition of control, its board of directors would only approve a prospective acquirer who met the necessary requirements in terms of ongoing commitments relevant to the health and prospects of the economy and society of Quebec.

Report on Indian coal industry and growth opportunities

In India, Coal has been recognized as the most important source of energy for electricity generation. Industries such as steel, cement, fertilizers and chemicals are major sectors of coal consumption. Coal Production is primarily directed by public sector undertakings.

RNCOS' report "Indian Coal Industry: Opportunities for Growth (2006)" provides extensive research and objective analysis of the Coal Sector in India to help analyzing the opportunities, challenges and the drivers critical to the growth of coal sector in India.

Its industry performance section covers the various aspects of the Indian coal industry such as production, consumption, Export & Import and pricing.

The report also addresses the issues and the facts that are critical to business success such as the emerging trends in the Coal sector in India, private players & their investment activities, challenges faced by the industry and the emerging technologies in the coal Mining Industries.

If you are interested to know more about it please visit RNCOS Indian Coal Report or send a mail at research@steelguru.com