It might be slump time in the steel industry, but there’s always room for a strategic investment or two for a global major like Posco.
The South Korean steel giant, the world’s 4th largest, continues to creep up the share register of Murchison metals and now has 12.26% stake, up from 9.7%.
The company’s local arm is now the second largest shareholder behind the Harbinger hedge fund group of the US which has just under 20%.
Posco is also sitting on a 20% stake in Macarthur Coal on the other side of the country where Citic Resources of China and ArecelorMittal, the world’s biggest steel companies, have similar shareholdings.
Posco is a major customer of Macarthur, as is Arecelor. Macarthur is the largest shipper of pulverised coal for the steel industry (it’s injected into blast furnaces in a mist-like spray to help heat the slag mixture).
Posco is a Murchison customer and said yesterday that it acquired 10.567 million shares on-market at an average price of 75c.
"We are always pleased when one of our investors, especially one as big as POSCO, adds to their shareholding," Murchison executive chairman Paul Kopejtka said in a statement to the ASX.
Murchison operates the modest Jack Hills iron ore mine 380km north-east of Geraldton in Western Australia.
Shares in Murchison had dropped 8% to 62c yesterday, so Posco is already sitting on a loss.
The federal government has okayed a move by Sinosteel of China to buy up to a 49.9% stake in Murchison.
The Western Australian government recently awarded rights to construct new port facilities at Oakajee to a joint venture between Murchison and Mitsubishi Corporation.
It is also considering proposals to build new railway lines to link the iron ore deposits in the Mid West region to the port.
Sinosteel has a small shareholding in Murchison and recently wrapped up a takeover of Midwest Corporation Limited, which has iron ore deposits adjacent to Murchison’s. Midwest and Murchison have previously sought to merge their operations by takeover proposals that did not proceed after it was blocked by Sinosteel’s acquisition of a blocking stake.
Harbinger was a shareholder in Midwest but was eventually forced to sell by Sinosteel.
Federal treasurer, Wayne Swan said in a statement when approving the move:
"In approving Sinosteel’s application, I have determined that a shareholding of up to 49.9 per cent in Murchison will maintain diversity of ownership within the Mid West region.
"The Government considers the development of such potentially significant new resource areas should occur through arrangements that are open to multiple investors.
"This approach is consistent with the national interest principles we released in February and with the approach I have outlined previously, including in discussions with my Chinese counterparts.
"The Government’s objective is that development of our considerable natural resource endowment occurs in a manner that allows Australia to remain a reliable supplier in the future to all current and potential trading partners.
"This ensures the maximum development of our resources and a fair return to all of the Australian community."
In an update at the start of October Murchison said:
"Significant progress has also been made with the iron ore mining and infrastructure projects being developed by Crosslands Resources Ltd (“Crosslands”) and Oakajee Port and Rail (“OPR”) respectively. Crosslands and OPR are jointly owned by Murchison and Mitsubishi Development Pty Ltd.
"Murchison’s 50% owned Crosslands continues work on its Jack Hills Stage 2 project and remains on track to complete its bankable feasibility study (“BFS”) in 2009.
"The BFS is underpinned by a JORC compliant mineral resource at Jack Hills comprising 96.6 million tonnes of Direct Ship Ore (DSO) at 50% Fe cut-off, and 434.8 million tonnes of Beneficiation Feed Ore (BFO). 1
"Crosslands continues to ship output from its Jack Hills Stage 1 project to its contracted customers in China and Korea. Crosslands recently shipped its 2 millionth tonne of ore and is on track to ramp up production to an annualised rate of 1.8 million tonnes per annum by early in 2009."
But prices are down, as are share values. Harbinger is sitting on a big loss in Murchison and some of its other investments around the world,
More to come?
