ArcelorMittal to sell $1.1 billion stake in Canadian unit

SEOUL/BRUSSELS Wed Jan 2, 2013 10:58am GMT

The logo of ArcelorMittal company is seen at the entrance of its headquarters in Luxembourg in this picture taken on November 20, 2012. REUTERS/Francois Lenoir

The logo of ArcelorMittal company is seen at the entrance of its headquarters in Luxembourg in this picture taken on November 20, 2012.

Credit: Reuters/Francois Lenoir

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SEOUL/BRUSSELS (Reuters) - ArcelorMittal (ISPA.AS), the world's biggest steelmaker, will sell a 15 percent stake in one of its Canadian iron ore operations, raising $1.1 billion (675 million pounds) to help pay off debt at a time of sluggish demand.

The group, which makes about 6-7 percent of the world's steel, will sell the stake in ArcelorMittal Mines Canada to a consortium including South Korean steelmaker POSCO (005490.KS) and Taiwan-listed China Steel (2002.TW), it said on Wednesday.

It is the latest in a series of steps to raise funds as slow global economic growth and spending cuts in Europe dampen demand for steel used in the car and construction industry.

"It's one of the more readily disposable parts of the business, and given they need to reduce debt I don't think its a massive surprise they are selling it," said Nomura analyst Neil Sampat.

ArcelorMittal wrote down the value of its European business by $4.3 billion last month and has had its credit rating cut to non-investment grade by all credit rating agencies.

Its net debt rose by $1.2 billion during the third quarter to $23.2 billion at the end of September.

The World Steel Association in October forecast steel demand would rise 2.1 percent in 2012, down from 6.2 percent in 2011.

ArcelorMittal Mines Canada operates two large open-pit mines in the province of Quebec, where it also owns the Port-Cartier industrial complex that includes a pellet plant, storage areas and port facilities for shipping.

ArcelorMittal also owns the huge Mary River iron ore project in Canada's arctic, in which it sold a 20 percent stake to joint venture partner Nunavut last month.

As part of the deal announced on Wednesday POSCO, China Steel and ArcelorMittal Mines Canada will enter into long-term iron ore supply agreements, ArcelorMittal said.

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ArcelorMittal's shares rose 3.7 percent in early Wednesday trading after the deal was announced, while POSCO shares were up 2.6 percent and China Steel rose 0.9 percent.

The group needs the funds to help compensate a slump in Europe, where demand is estimated to have fallen about 8 percent in 2012 and 29 percent since the start of the financial crisis in 2007.

ArcelorMittal has already announced the closure of blast furnaces in Belgium and France, with other operations on the continent also being temporarily idled due to overcapacity.

The Canadian deal will give POSCO, the world's fourth-biggest steelmaker, increased access to iron ore. POSCO currently imports nearly all of its key raw materials and owns a 12.5 percent stake in Australia's $10 billion Roy Hill project.

Earlier on Wednesday, a South Korean wire service Yonhap Infomax reported China Steel and POSCO would jointly contribute $540 million, while the remainder was expected to be paid by financial investors including South Korea's National Pension Service.

A POSCO spokeswoman confirmed a consortium involving POSCO signed a stock purchase agreement to acquire a stake in the iron ore mine operator, but declined to give details.

ArcelorMittal is one of Canada's top exporters of iron ore to steel markets around the world and its operations account for about 40 percent of Canada's iron ore output.

The transaction is subject to approval from the Taiwanese government, and is expected to close in two instalments in the first and second quarters of 2013.

Goldman Sachs (GS.N) and RBC Capital Markets were advising ArcelorMittal on the deal, while Morgan Stanley (MS.N) is advising the POSCO consortium.

(The story removes extraneous euros in fifth paragraph)

(Reporting by Joyce Lee in Seoul, Robert-Jan Bartunek in Brussels and Denny Thomas in Hong Kong; Editing by Michael Perry and Anna Willard)

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