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ArcelorMittal Enters Off-Take Agreement with Coal of Africa Limited
04/24/2008 - ArcelorMittal reaches an off-take agreement with Coal of Africa Limited that includes a minimum of 2.5 million tonnes per annum of coking coal from the company’s two mines in the Limpopo Province of South Africa.
ArcelorMittal has reached an off-take agreement with South-Africa-based coal developer, Coal of Africa Limited (CoAL).
The agreement relates to two mines, including Baobab, whichis 100% owned by CoAL and has an estimated yield of 2.45 million tonnes per annum. The second, Thuli is 74% owned by CoAL and has an estimated yield of 4.2 million tonnes per annum. Both mines are located in the Limpopo Province of South Africa.
The agreement will take effect from commencement of mining operations at both mines, which is expected to take place by the end of 2009, with full production expected to come on stream by 2011. ArcelorMittal will secure a minimum of 2.5 million tonnes per annum of coking coal from the two mines.
ArcelorMittal also has an option to increase its coal off-take to 5 million tonnes per annum, and will also have the right to nominate one person to be appointed as a Director of the company following completion of the placement of shares.
The companies have agreed in principle that the coal will be delivered to the town of Musina in the Limpopo province, at a Free-on-Rail (FOR) price linked to the Free-on-Board (FOB) price for Kestrel hard coking coal sold by Rio Tinto and reported by Wood Mackenzie (assuming similar quality and specification parameters).
ArcelorMittal will subscribe to 60 million new ordinary shares in the sum of £66.7 million (USD 132.15 million) which represents approximately 16% of CoAL’s issued capital on a diluted basis (Placement Shares). Tranche 1 of the placement to ArcelorMittal is now complete, and a total of 46,365,000 Shares have now been allotted and issued. Tranche 2 (the agreed placement to ArcelorMittal of 13,635,000 shares) remains subject to approval by the Australian Foreign Investment Review Board.
Terms and conditions of the off-take agreement are subject to final negotiations, completion of formal documentation and securing all relevant regulatory approvals.
Coal of Africa Limited (CoAL) is focused on the acquisition, exploration and development of thermal and metallurgical coal projects. The company’s key projects, along with its leading metals processing company NiMag Group (Pty) Ltd, are in South Africa.
ArcelorMittal is the world's largest and most global steel company, with 310,000 employees in more than 60 countries. The company leads a number of major global markets, including automotive, construction, household appliances and packaging, with leading R&D and technology, as well as sizeable captive supplies of raw materials and outstanding distribution networks. An industrial presence in 28 European, Asian, African and American countries exposes the company to key steel markets, from emerging to mature, positions it will be looking to develop in the high-growth Chinese and Indian markets.
ArcelorMittal’s key financials for 2007 show revenues of USD 105.2 billion, with a crude steel production of 116 million tonnes, representing around 10% of world steel output.
