Posco of South Korea, the world's third-biggest steelmaker, prompted by heating competition from rival Asian steelmaking countries China and India, as well as the United States, on Tuesday announced it is in talks to increase its ownership control in the Roy Hill iron ore project in Western Australia.
POSCO, the world's fourth-largest steel producer, has waited eight years to get necessary clearances, land and an iron ore mining licence to start work on the plant in eastern Odisha state.
Posco, which competes with ArcelorMittal, China's Baosteel and Japan's Nippon Steel, said it will invest some $1.6 billion in Roy Hill Holdings Pty Ltd. to ensure a steady supply line of iron ore, being completely reliant on imports of the raw commodity to sustain its business existence.
The development, which is still being finalised with Australia's Hancock Prospecting, its co-venture partner in the Roy Hill iron ore project and which is owned by Australia's richest woman, Gina Rinehart, will effectively increase to 15 per cent its stake in the project. Posco controls 3.75 per cent in Roy Hill Holdings Pty Ltd. This expansion is by far Posco's biggest investment in resources to date.
The Roy Hill iron ore project venture aims to export 55 million tonnes annually from Port Hedland of Western Australia beginning 2014.
South Korea, ranked Asia's fourth-largest economy, sources from Australia majority of its iron ore requirements due to proximity. It had more than doubled its outlay expenditures on overseas mineral resources acquisitions on iron and coal to $2.6 billion in 2010 from $1.0 billion the previous year.
The Roy Hill iron ore project, believed to hold an indicated and inferred resource of over 2.4 billion tonnes of iron ore, is found 277 kilometres south of Australia's Port Hedland, the world's second largest iron-ore port after Brazil's Sao Luis.
Posco, the world's fifth-largest steelmaker by market share, believes investments in Australia, Brazil, Canada and Africa will boost its self-sufficiency in raw materials to 50 per cent from the current 20 per cent.
In 2010, it contributed 2.5 per cent of the world's total iron ore production.
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