In its second takeover in North America in three days, India’s Essar Steel has announced that it will acquire Minnesota Steel, a US company with considerable iron ore reserves to boost its plan to build an advanced ‘mine mouth’ steel plant in Minnesota. The financial arrangements for the acquisition of privately held Minnesota Steel were not revealed, but India’s third-largest steelmaker has said that it would invest a total of $1.65 billion in the plant and the company’s acquisition. According to reports, Minnesota Steel’s owners would receive between $80 million and $100 million.
John Elmore, Minnesota Steel’s chief executive officer, has said, ‘Essar will invest about $1.65 billion to build the 2.5 million-ton-a-year mill in northern Minnesota.’ According to present estimation the reserves are enough for about a century’s steel production. Minnesota Steel possesses about 1.4 billion tons of iron ore reserves in the Mesabi range in northeast Minnesota; and recently it was planning to construct a complex there that would integrate mining, processing and steel production on a single site, which the company says could bring cost savings of as much as 20 percent.
John Elmore further said, ‘the agreement will require Essar to provide up to $1.65 billion for the construction of an iron mining, ore processing, direct reduction and steel making operation on one site with a final estimated annual capacity of 2.5 million tons. The agreement requires Minnesota Steel officials to deliver all necessary approvals and permits.’ Additional terms and conditions of the deal were not disclosed yet.
Both the companies hope wrapping up of environmental review and permitting processes in time for construction to begin in the third quarter this year. Moreover, production is expected to start as early as 2009, with a preliminary output of 1.5 million tons of semi-finished steel product. Construction over a two-year period will employ an anticipated 2,000 workers. Once operational, the unit is likely to employ about 700 fulltime workers and is estimated to generate an additional 2,100 spin-off jobs.
In fact, Indian steel companies have been looking overseas for acquisitions as demand at home and in China in particular are growing significantly. Anxiety about declining natural resources and low transportation costs has contributed to the rapid consolidation of the steel industry.
