Africa’s largest steel producer ArcelorMittal South Africa has acquired ArcelorMittal Group’s 16.3% stake in Coal of Africa Limited (CoAL) for R404.5M in cash.
The transaction will secure part of ArcelorMittal South Africa’s future coal needs, mitigating one of the company’s key variable input costs. As part of the transaction, ArcelorMittal South Africa has an option to enter into an off-take agreement with CoAL for the supply of 2.5 mtpa of metallurgical (coking) coal.
ArcelorMittal South Africa last year purchased 5.2 mt of coal, which makes it one of the largest input raw materials for the company.
In addition to securing future coal supplies, ArcelorMittal South Africa believes that the quality of the coal it will procure from CoAL’s Vele Colliery Project will enable the company to increase the quantity of local coal in its overall coal mix to feed its furnaces, further enhancing management of input costs.
Commenting on the transaction Nku Nyembezi-Heita, ArcelorMittal South Africa CEO said: “This transaction ensures secure supplies of a key input material for the steelmaking process and is an important step in our strategy to pursue raw material backward integration”.
The 16.3% stake makes ArcelorMittal South Africa CoAL’s second largest shareholder after the 17.3% owned by Africa Management Limited, a black economic empowerment company associated with the Mvelaphanda Group.
