Steel maker MMK targets iron ore in Australia buy
SYDNEY/MOSCOW, Nov 25 (Reuters) Russia MMK is to buy Australian group Flinders Mines for an agreed A$554 million ($538 million) in a deal highlighting concerns over the canada goose replica steelmaker debt burden and prospects for its existing iron ore production.
Steelmakers have Canada Goose sale been buying upstream assets to lock in supply and keep costs down, allowing them to remain profitable during downturns. ArcelorMittal, the world largest steelmaker, is also one of the top five producers of iron ore and coking coal.
Magnitogorsk Iron Steel Works (MMK) has been seeking to Canada Goose Coats On Sale boost its mining operations and increase the proportion of iron ore demand it can supply itself. Currently, it is 30 percent self sufficient in iron ore, according to analysts.
Its 30 cents per share cash offer was an 82 percent Canada Goose online premium to Flinders last traded price on Tuesday, before MMK interest was disclosed, and sent the Australian exploration company stock galloping 70 Canada Goose Outlet percent to a record high canada goose outlet store locations of A$0.29 on Friday.
Analysts, however, said the deal raised questions about the success Canada Goose Online of MMK existing iron ore project, Prioskol. Its shares were down 2.5 percent at 2018 canada goose outlet 12.35 roubles by 1310 GMT.
The acquisition will probably not contribute to earnings until 2015 canada goose black friday sale at the earliest, said Barry Ehrlich, senior analyst at Alfa Bank in Moscow.
an (MMK) investor Canada Goose Parka point of view, this is a bad deal and the stock will most likely underperform over the next six months, he said.
Flinders is targeting production from its Pilbara iron ore project by 2015, it said.
Ehrlich said he would have preferred to see MMK develop its own Prioskol project in Russia, which would not have involved a major cash outflow, adding the Flinders deal suggested Prioskol was not going forward.
Analysts canada goose store also pointed to debt at MMK, which had long term borrowings of $2.6 billion at the end of June and total non current liabilities of $4.2 billion. MMK said earlier in the week in a statement expressing Canada Goose Jackets interest in Flinders that it could obtain a loan from Bank of Moscow for up to $100 million.
company is stretched on the balance sheet, it is overleveraged and the last three quarters have been weak, VTB Capital analyst Igor Lebedinets said.
MMK deal came the day canada goose clearance sale after Japanese group Mitsubishi Corp offered to buy Murchison Metals stakes in another iron ore project and infrastructure in Australia for $315 million.
HEDGING THEIR BETS Snapping up canadian goose jacket Flinders canada goose coats on sale will, however, help cushion buy canada goose jacket cheap MMK against iron ore price rises.
of canada goose clearance an iron ore business in Australia represents a natural hedge against growing prices for iron ore, the main cost component for MMK, UniCredit analyst Marat Gabitov said in a research note, noting there were no obvious synergies between the Pilbara iron ore project and MMK main production site in Magnitogorsk, given the geographical canada goose remoteness 2018 canada goose .
Gabitov said the increase in the price of iron ore had halved MMK EBITDA margin to 15.6 percent in the second quarter from 31.2 percent in 2006, while steel prices rose a third over the period.
MMK decision to look outside Russia was in contrast to some local rivals.
Severstal, which has overtaken Novolipetsk Steel to become Russia canada goose outlet toronto factory largest steelmaker by market capitalisation, views foreign deals as cheap Canada Goose potentially earnings dilutive.
Flinders, which like other exploration companies is facing a future of tough credit conditions, said a takeover by MMK would eliminate risk that its mine canada goose deals in the Pilbara iron belt of west Australia would not be developed.
Its main project has a 20 year mine life and could produce up to 15 million tonnes of iron ore annually small by Australian measures starting as early as end 2012.
By comparison, Rio Tinto mined more than 200 million tonnes of ore, BHP Billiton 155 million tonnes and Fortescue around 40 million tonnes last year.
While Australian iron ore is traditionally less rich than material from Brazil, buy canada goose jacket it is much closer to Asia economic canada goose coats powerhouses topcanadagoose . Flinders deposit is near Rio Tinto Tom Price iron ore mine in the Hamersley Ranges. ($1 = 1.0290 Australian dollars) (Additional reporting by Clara Ferreira Marques in London; Editing by Dan Lalor and David Cowell).