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Steel Partnership Inches Closer to Namisa Acquisition

10/21/2008 - Companhia Siderúrgica Nacional establishes strategic partnership with a consortium of Asian steelmakers that would acquire 40% of the total capital of CSN subsidiary Nacional Minérios SA for the aggregate amount of approximately US$ 3.12 billion.

Companhia Siderúrgica Nacional (CSN) has established a strategic partnership with a consortium of Asian steelmakers proposing to acquire 40% of the total capital of CSN subsidiary Nacional Minérios SA (Namisa) for the aggregate amount of approximately US$ 3.12 billion.

 

Namisa, located in the state of Minas Gerais, Brazil, operates an iron ore project through self-owned mines and beneficiation plants.
 
Namisa’s operation is fully integrated with railway and port facilities through long-term contracts that provide sufficient capacity to fully cover current and future shipment needs.
 
CSN is scheduled to transfer a 10% stake in MRS Logística SA, a railway transportation company connecting the mines and port, to Namisa as part of the transaction. The transfer of MRS shares into Namisa will further ensure Namisa’s access to transportation infrastructure for the long-term participation in the project.
 
Namisa is scheduled to sell 18 million tonnes of iron ore in 2009 and to expand its sales to 38 million tonnes/year by 2013 through the course of its expansion plan.

The consortium, which is led by Japan’s Itochu Corp., also includes Nippon Steel Corp., JFE Steel Corp., Posco, Sumitomo Metal Industries, Ltd., Kobe Steel, Ltd., and Nisshin Steel Co., Ltd. Of the consortium’s total investment, Itochu will be responsible for approximately 40%, an investment of about US$ 1.25 billion. JFE, Nippon, and Posco would each contribute 16.2% of the total investment, with Sumitomo Metal Industries contributing 6.57%, Kobe Steel contributing 3.08%, and Nisshin Steel contributing 1.75%.
 
In addition to the acquisition of Namisa shares, the five Japanese steel producers and Posco are expected to enter into long-term iron ore purchase agreements with Namisa. Each steel producer is expected to purchase iron ore from Namisa starting in year 2009, and is to purchase up to 14 million tonnes/year after Namisa’s expansion plan is completed in 2013. Itochu will support the long-term stable supply of these volumes to the Japanese steel producers and Posco.
 
CSN selected the consortium as part of a global auction process to evaluate partners that could help it jointly develop the Namisa project into a stable, profitable business. The consortium offers Itochu’s substantial experience in the operation of iron ore businesses and the trading of iron ore in Australia and Brazil, as well as the Japanese and Korean steel producers’ solid reputation as stable iron ore purchasers.
 
Following completion of the acquisition, CSN will remain as the majority shareholder of Namisa, holding a 60% stake post-transaction. The Consortium and CSN will establish a long-term partnership through their cooperation to enhance the profitability of Namisa. This landmark transaction is the first example of an investment in the iron ore business by a consortium including both Japanese and Korean companies. Approvals for the transaction are subject to finalization and execution of the definitive transaction agreements.
 
The parties expect to sign final documentation on Tuesday, October 21, 2008.
 
CSN is one of the world’s leading fully-integrated steel producers with other notable high-quality assets such as the Casa de Pedra mine. Nacional Minérios SA, CSN’s wholly-owned iron ore mining and sales subsidiary, was established in Nov. 2006 and is located in the State of Minas Gerais.