POSCO's Daring Moves

POSCO acquires 10 percent stake in Australian coal mine to secure supply of coal

POSCO, the nation's largest blast-furnace steel mill and the world's fifth largest steelmaker, has taken over a 10 percent stake in the MacArthur Coal Mine in Australia for 422.7 billion won, an official of the steel company said recently.
The steel giant has agreed to buy a 10 percent stake, or 21 million shares of the coal mine's shares, from its founder and former president Ken Talbot. POSCO will pay AU$20 per share as agreed with the former president of the coal mine, awaiting the approval of POSCO's board of directors for the largest stake takeover ever made by the steelmaker in its history.
POSCO's Australian deal is larger than its investment in a nickel mine in New Caledonia, valued at US$352 million in 2006.
POSCO officials said Arcelor-Mittal is the largest foreign shareholder in the MacArthur Coal Mine with a 19.9 percent stake, followed by China's CITC with 17.7 percent. POSCO will be the third largest shareholder when the deal is completed.
POSCO will be able to participate in management of the coal mine under the deal and can also demand more shares in new coal mines to be developed by MacArthur Coal.
The MacArthur Coal Mine is located in eastern Australia and is the largest supplier of pulverized coal used in steel mills. Since POSCO has been getting 600,000 tons of coal from the mine annually, the steelmaker decided to buy a stake in the coal mine to ensure a supply of coal for its use, which is part of the steelmaker's decision to up the ratio of coal supplies from the mines in which it holds stakes to 30 percent by 2018.
The steelmaker currently has been getting from 15 to 22 percent of its coal supplies from mines in which it invests.
POSCO has been after overseas coal miners to make investments in their mines due to heated competition for resources among steelmakers around the world. Arcelor-Mittal, the largest steelmaker in the world, acquired stakes in MacArthur Coal just last month and Chinese steelmakers and national funds are after acquiring stakes in a Brazilian iron ore mine, further intensifying the competition among steel makers around the world to secure natural resources.
The Wall Street Journal in a recent article on the world steel industry, said the industry has been consolidating in order for steelmakers to beef up the scale of their operations, but they are now engaged in a competition to acquire natural resources. The U.S. business daily wanted to point out the importance of securing natural resources for steelmakers around the world with the prices of natural resources like minerals and oil rising steeply in the last several years.
Securing natural resources like iron ore, coal and oil have become so dire that steelmakers'survival may depend it, the paper indicated.
In the meantime, POSCO has been spurring its plans to diversify its business lines such as solar power plant development. In its first move in that direction, the steel giant covered the roofs of its plants with solar power generation modules at its Gwangyang steel complex in South Jeolla Province. The steelmaker expects 1 Mw of electricity will be generated from the modules and plans to install the solar modules in the storage house in its Pohang steel complex in North Gyeongsang Province. The steelmaker said it is the first time that solar power modules have been installed on the roofs of a large industrial plant in Korea.
POSCO ultimately plans to build a solar power facility large enough to generate 2,500 Mw of electricity a year and sell it to the Korea Electricity Power Corp. The facility will supply power enough to take care of the electricity needs of 500 homes.
POSCO aims to earn 1.6 billion won annually from the solar energy business by utilizing the roofs of its steel plants, which otherwise will remain idle. The company also hopes to reduce 1,600 tons of greenhouse gases. nw

POSCO's Gwangyang steel complex in Gwangyang, South Jeolla Province.

Chairman & CEO Lee Ku-taek of POSCO.