POSCO Secures Rare Mineral

Steelmaker and NPS jointly buy 5% stake in Brazilian niobium mining company

POSCO has decided to take over a 5 percent stake in CBMM, a mining company that produces niobium, jointly with the National Pension Service for about $700 million, the steel giant announced recently.
The official signing for the purchase will take place on April 4 in Tokyo and the two partners will split the cost evenly, taking 2.5 percent of the stake each. This is the first time that a commercial firm has made a joint investment overseas with NPS in a consortium.
Niobium is a metal that goes into making steel products for automobiles and other high-quality steel including steel oil pipes. CBMM, founded in 1955 in Minas Gerais in Brazil’s southeast, is the largest niobium miner in the world, commanding an 80 percent share of the world market for the mineral, with 800 million tons in niobium reserves, POSCO said.
POSCO said it has now secured a stable supply of the mineral that goes into steel plates for automobiles, which is some 20 percent to 30 percent more expensive than ordinary steel plates. Both POSCO and NPS are part of the consortium that includes four Japanese mineral firms including JFE Holdings and JOGMEC, which will take over a 10 percent stake in the Brazilian mining company. The steelmaker said it will continue to invest in mineral mines overseas through Daewoo International, one of its affiliates that it took over last year.
POSCO has been getting supplies of niobium jointly with JFE Holdings through Sohjitsu, a Japanese trading firm. However, it is the first time for POSCO to secure rare minerals like niobium jointly with Japanese firms, which is being seen as an attempt by both Korean and Japanese firms to make joint moves against Chinese mineral firms’ attempts to expand their overseas operations to secure rare minerals.
Industry sources said securing a 5 percent stake in the Brazilian niobium mining company would fully satisfy the need for the mineral in Korea, while both POSCO and NPS could earn sizeable dividends from their stake in CBMM, as it pays 90 percent of its profits to shareholders annually.
In the meantime, POSCO Group will take over a coal-fired thermal power plant in Vietnam and operate it at an investment of 170 billion won in the next four years, said POSCO Power Co., an affiliate of POSCO, on Feb. 23.
The company signed a contract to take over a 30 percent stake in Mongjun II Coal Thermal Power Plant in Vietnam from AES at POSCO Center in Seoul in the presence of various officials from the related companies including POSCO Chairman Chung Joon-yang, Chairman Paul Hanrahan of AES, President Cho Seong-sik of POSCO Power, Vietnamese Ambassador to Seoul Tran Trong Toan, Counselor Eric Hunt of the U.S. Embassy in Seoul and others totaling about 50.
Chairman Chung said it is very significant that POSCO now has a thermal power plant operation in Vietnam, the first such facility operated by a private company, and all parties concerned including the Vietnamese government, POSCO and AES want the power plant to be a successful venture. POSCO Power would like to learn the operation of a coal-fired power plant so that it can use the experience for making further advances into the thermal power plant business overseas.
POSCO Power will set up a special firm and invest 170 billion won in the AES-VCM Mongjung Power Plant by 2015 under a management strategy to share profit from the power plant on its 30 percent stake and run the power plant jointly with AES.
The consortium plans to build the projected thermal power plant, capable of generating 1,200 Mw of power, in Quanning State in the northern part of Vietnam and commence operations in July 2015, operate it for 25 years and then turn it over to the Vietnamese government.
POSCO has also designated renewable energy as their new growth engines in response to the government’s low-carbon, green growth policy and are promoting the fuel cell business, which is next-generation, eco-friendly energy. They are looking forward to growing and developing as a future core company for green growth in Korea by establishing renewable energies including wind, solar and tidal power as businesses for their choice-and-focus strategy.
In this way, POSCO Power will remain Korea’s energy specialist company. They plan to establish more LNG power plants to utilize clean energy, recycling waste energy through off-gas composite power generation, and promote new renewable energy businesses, while growing as a genuinely global company by entering the international market through cooperating with the world’s leading energy companies. nw

Chairman Chung Joon-yang talks with Indian Prime Minister M. Singh during his visit to New Delhi, India, last year, in connection with POSCO’s project to build an integrated steel mill in India.

Photo by courtesy of POSCO