ArcelorMittal, the world's biggest steelmaker, said it will spend $850.5 million acquiring an iron ore mine and developing a port in Brazil to increase self sufficiency in the raw material. ArcelorMittal will pay about $810 million for London Mining Plc's Brazilian iron-ore unit, Luxembourg-based ArcelorMittal said on Wednesday in a statement. It will also take an 80 percent stake in a port in Rio de Janeiro state for $40.5 million and will develop the facility with Canada's Adriana Resources Inc. “It's a good move for ArcelorMittal,'' Luc Pez, an analyst at Oddo & Cie based in Paris who has an “add'' recommendation on the shares, said today by telephone. “Raw-material costs look set to remain high for the next few years.'' Founder Lakshmi Mittal is seeking to expand ArcelorMittal's raw-material supplies after iron-ore prices gained for a sixth straight year and the cost of coking coal surged to records. Mittal said in April that he aims to increase self-sufficiency in iron-ore to 75 percent to 80 percent by as early as 2014. Arcelormittal advanced 1.84 euros, or 3.7 percent, to 52.05 euros at 12:37 p.m. in Amsterdam. London Mining rose as much as 10 kroner, or 36 percent, to 38 kroner ($7.03) in Oslo. It said about $427 million from the transaction will be returned to shareholders. London Mining's Brazilian unit, London Mining Brasil, is located in the state of Minas Gerais and was acquired by the UK company in May 2007. It's expanding production of so-called concentrate and lump ore to 3.2 million metric tons a year, from 1.4 million tons. ArcelorMittal may invest as much as $700 million to raise output to more than 10 million tons. The development of the port in Sepetiba Bay to handle that volume will cost about $250 million. Construction will start in the final quarter of 2008 and is expected to take between 18 months and 2 years to complete. ArcelorMittal's Brazilian investment “ensures that our iron ore base is further diversified in the face of tighter supply for raw materials,'' Chief Financial Officer Aditya Mittal said in the statement. The company's Brazilian commitment comes two weeks after ArcelorMittal said it plans to invest $1.6 billion in the country to increase steel production there by two-thirds. The steelmaker also agreed last month to buy West Virginia-based Concept Group, the latest addition to its coking coal supplies. London Mining said May 7 that iron-ore resources at its mine in Brazil were 598.8 million tons, compared with a previous estimate of 266.3 million tons. ArcelorMittal was advised on the acquisition by RBC Capital Markets.
