Severstal Acquires Stake in Brazilian Iron Ore Exploration Company
05/12/2011 - OAO Severstal has acquired a 25% stake in SPG Mineração, a Brazilian company that owns highly prospective iron ore exploration licenses in the northern state of Amapa, Brazil.
OAO Severstal has acquired a 25% stake in SPG Mineração, a Brazilian company that owns highly prospective iron ore exploration licenses in the northern state of Amapa, Brazil.
The total consideration of the deal is $49 million payable in performance-related installments, with part of the amount to be directed to finance the first stage of geologic exploration, which aims to reconfirm the geologic potential of the target’s properties. Severstal has also entered into a call option agreement to purchase an additional 50% stake in this company, exercisable upon completion of certain conditions.
Severstal believes that the Amapa project has high potential with an estimated resources potential of 0.5 to 1.5 billion tonnes with an approximately 40-45% Fe grade. Production potential is estimated at around 10 to 20 million tonnes of iron ore concentrate.
The project is located near a railway and a port, but the company says it will consider developing its own logistics solution.
Severstal is an international steel and mining company with a listing on the Russian Trading System and on the London Stock Exchange. Investing in primary steel-related raw materials is one of Severstal's strategic priorities, allowing the company to develop a global portfolio of projects to diversify raw material supply and secure the future growth of the steel operations. In 2009, Severstal produced 16.7 million tonnes of steel.