Severstal acquires a stake in a Brazilian iron ore exploration company

OAO Severstal (“Severstal”) (LSE: SVST; RTS: CHMF), one of the world’s leading vertically integrated steel and mining companies, announces that it has acquired a 25% stake in the Brazilian company SPG Mineração (“SPG”). SPG owns highly-prospective iron ore exploration licences in the northern state of Amapa, Brazil.

 

The total consideration of the deal is $ 49 mln payable in performance-related installments, with part of the amount to be directed to finance the first stage of geologic exploration, which aims to re-confirm the attractive geologic potential of the target’s properties. Severstal has also entered into a call option agreement to purchase an additional 50% stake in this company, exercisable upon completion of certain conditions.

 

Severstal believes that the Amapa project has high potential with an estimated resources potential of 0.5 — 1.5 billion tonnes with an approximately 40−45 % Fe grade. Production potential is estimated at around 10−20 million tonnes of iron ore concentrate. The project is located near to a railway and a port, however, the company intends to consider developing its own logistics solution, with a few options are currently considered.

 

Investing in primary steel-related raw materials is one of Severstal's strategic priorities, allowing the company to develop a global portfolio of projects to diversify raw material supply and secure the future growth of the steel operations. Severstal focuses on attractive emerging markets with significant long-term growth potential and favourable export logistics.