Iron-ore pellet producer Cleveland-Cliffs has reached the final step in the implementation of its US iron-ore-centric strategy with the announcement on Tuesday that it would sell its Australian iron-ore business.
The Cleveland, Ohio-based firm has reached an agreement with Australian mining services company Mineral Resources (MinRes) to sell the assets of its Asia Pacific Iron Ore business, which is earmarked for closure by month-end.
Cliffs in March formally notified contractors that it would close the 11-million-tonne-a-year iron-ore business, which has fallen into the red, owing to the growing price discount of lower-grade iron-ore.
It is understood that the company would have had to pay $90-million to break long-term contracts with its suppliers at the Koolyanobbing iron-ore complex.
Cliffs said that the transaction would reduce the cost of closing the Australian business by between $65-million and $75-million, based on MinRes assuming certain obligations and Cliffs reaching negotiated settlements with third parties.
“The sale of these assets to Mineral Resources marks Cliffs’ exit from the Australian iron-ore business, and represents the final step in the implementation of our US iron ore-centric strategy.
“We are pleased to have reached agreement on a transaction that not only brings real value to Cliffs shareholders, but also represents the potential for continued job opportunities for employees in Western Australia who would be impacted by the pending closure of the Koolyanobbing complex,” Cliffs president and CEO Lourenco Goncalves said in a statement.
The transaction is expected to close before the end of the second quarter of 2018, subject to certain conditions precedent being achieved. Cliffs stated that the deal was structured as a sale of the following assets and assumption of certain related liabilities: mining tenements, mine facility assets, port assets and the benefit of certain contracts.
Cliffs is fortifying its US business and expects to be the sole producer and supplier of hot briquetted iron (HBI) to the growing electric arc furnace steel industry in the Great Lakes region by 2020. The company recently broke ground at its first HBI plant in Toledo.
Cliffs owns five iron-ore mines located in Michigan and Minnesota produce various grades of iron-ore pellets, including standard and fluxed, for use in blast furnaces.