OneSteel announced on Monday (August 22) that it has forged an agreement with WPG Resources Limited (WPG), acquiring the latter's iron ore assets in northern South Australia for $346 million.
The said deal would further increase OneSteel's mining assets and promote its expansion plans in the medium term, the company said in a statement to the Australia Stock Exchange (ASX).
As a fully integrated, global manufacturer and distributor of steel and finished steel products OneSteel's acquistion of WPG's mineral assets would give the company access to Peculiar Knob high grade DSO haematite project and the Buzzard and Tui DSO hematite and magnetite deposits at Hawks Nest in addition to selected iron ore exploration assets.
In the same company announcement, OneSteel said it will invest an additional A$50 million for capital expenditure to complete the infrastructure at Peculiar Knob.
Moreover, OneSteel will also put an additional A$200 million for the expansion of its export port facilities at Whyalla, South Australia.
OneSteel said the project will bring the export capacity of its port facilities to 12 million tonnes per annum by fourth quarter of calendar year 2012 from the current capacity of 6.5 to 7 million tonnes per annum.
It said cost of the expansion is still subject to "finalisation of design and scope."
"Today's announcement reflects significant work carried out by the company over an extended period to ensure we maximise the opportunities from our port facilities at Whyalla, and is consistent with our stated strategy of investing to grow our resources focused mining and mining consumables businesses," OneSteel Managing Director and CEO Mr. Geoff Plummer said.
He said the WPG assets are quality high grade iron ore and OneSteel expects to commence sales of this ore in the fourth quarter of the 2012 calendar year.
"We expect the combination of the high quality iron ore and our 'speed to market' through our proven capability to quickly expand the port and related infrastructure will deliver attractive returns for OneSteel and its shareholders," Mr. Plummer said.
WPG in a separate announcement said the transaction to OneSteel will compliment the sale of WPG's subsidiaries, namely, Southern Iron Pty Ltd, Central Iron Pty Ltd and Coober Pedy Resources Pty Ltd on a "cash- and debt-free basis."
OneSteel's acquisition of WPG's assets will close in October 2011.
Whyalla North Harbour Expansion
OneSteel said the expansion at the Whyalla North Harbour requires construction of additional receival and storage facilities and ship loading facilities and expansion of transhipping operations.
"The port expansion opens a number of opportunities for increased sales from OneSteel's existing iron ore operations, as identified through the ongoing review of OneSteel's mining operations in the Middleback Ranges, and through the acquisition of the WPG iron ore assets," Mr. Plummer said.
The company said it does not anticipate any major disruption to its existing iron ore export operations throughout the expansion period.
"Progressing these two initiatives simultaneously delivers a significant step up in our port capacity and iron ore sales, including enabling us to leverage our existing infrastructure to deliver high grade ore to the market quickly to take advantage of current iron ore prices," Mr. Plummer said. With reports from Alena Flores