WEST CHESTER, Ohio,
Oct. 4, 2011 /PRNewswire/ -- AK Steel
(NYSE: AKS) announced today that it has formed a joint venture with
an existing company that will produce iron ore concentrate, a
feedstock for iron-based steelmaking raw materials, and, in a
separate transaction, acquired all of the stock of a company with
significant reserves of low volatile metallurgical coal (met coal),
used to produce fuel for iron-making blast furnaces, which AK Steel
operates in Middletown, OH and
Ashland, KY.
"These investments represent significant steps in AK Steel's top
strategic initiative to further vertically integrate through
increased ownership of steelmaking raw materials," said
James L. Wainscott, Chairman,
President and CEO of AK Steel. "They give AK Steel a clear
plan for increasing raw material self-sufficiency, and will provide
us with both a financial hedge against global market price
increases and low-cost steelmaking inputs for our own consumption.
Importantly, we believe these acquisitions will be accretive
to AK Steel's earnings in 2012, and further enhance our financial
results as raw material production increases."
Iron Ore Transaction Details
AK Steel's investment in iron ore was made through a joint
venture with Magnetation, Inc. (Magnetation), a private company
headquartered in Nashwauk, MN,
which recovers high-purity iron concentrate from legacy reserves of
previously mined ore deposits using low-cost and
environmentally-sound proprietary technology.
AK Steel owns 49.9% of the new joint venture, named Magnetation
LLC, which currently produces about 400,000 metric tonnes (441,000
short tons) of iron ore concentrate annually from a plant near
Keewatin, MN. The joint venture is
constructing a second plant near the existing operation with a
targeted annual capacity of approximately 1 million metric tonnes
(1.1 million short tons). The joint venture expects to expand to a
rate of about 3.5 million metric tonnes (3.9 million short tons)
annually by 2016 with a total of four concentrate plants.
Magnetation LLC also plans to complete construction, by 2016, of
an approximate 3 million metric tonnes-per-year (3.3 million short
tons-per-year) pelletizing plant which will then consume the
majority of the joint venture's iron concentrate production. The
iron ore pellet production will satisfy about 50% of AK Steel's
current iron ore pellet requirements, at a cost substantially below
the current world market price.
Magnetation utilizes magnetic separation technology to recover
iron ore from existing stockpiles of previously mined material.
Utilizing these iron ore "tailings" eliminates the need for
traditional drilling, blasting and excavating, and can result in
the creation of new wetlands in an environmentally responsible
method.
AK Steel said it will contribute a total $297.5 million for its interest in the joint
venture, funded over several years, with an initial investment of
$100 million in 2011. AK Steel
expects to invest $47.5 million in
the third quarter of 2012, with the remaining $150 million funding anticipated between 2013 and
2016.
Metallurgical Coal Transaction Details
AK Steel also said it had acquired all of the stock of Solar
Fuel Company, Inc., a private company which controls, through
ownership and lease, estimated reserves exceeding 20 million short
tons (based on U.S. Securities and Exchange Commission
guidelines) of low volatile met coal in Somerset County, PA.
AK Steel said that it will pay $36
million in cash for the coal company, which the company
plans to rename AK Coal Resources, Inc. (AK Coal Resources),
consisting of $24 million in 2011,
and the balance paid over the following three years. AK Steel said
it expects to invest approximately $60
million in AK Coal Resources, most of which is expected to
be spent between 2013 and 2015, to develop its mining operations
and begin coal production.
AK Steel anticipates that AK Coal Resources' met coal production
will provide the steelmaker with significant cost savings for low
volatile met coal once mining activities commence. Such savings may
be achieved through direct consumption and/or third party sales as
a financial hedge to the market prices of met coal.
AK Steel Webcast Scheduled
AK Steel said that it will provide live listening access on the
Internet to a call with analysts and investors it has scheduled for
11:00 a.m. Eastern Time on
Wednesday, October 5, 2011, to
discuss the two raw material transactions detailed in this news
release and their impact on the company. Access to the
webcast will be available from the home page of the company's
website at www.aksteel.com. The webcast will be archived on
the company's website until October 12,
2011 and will be accessible from the home page.
Safe Harbor Statement
The statements in this release reflect management's estimates
and beliefs and are intended to be, and hereby are identified as
"forward-looking statements" for purposes of the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Words such as "expects," "anticipates," "believes,"
"intends," "plans," "estimates" and other similar references to
future periods typically identify such forward-looking
statements.
The company cautions readers that such forward-looking
statements involve risks and uncertainties that could cause actual
results to differ materially from those currently expected by
management, including those risks and uncertainties discussed in
the company's Annual Report on Form 10-K for the year ended
December 31, 2010, as updated in our
Quarterly Reports on Form 10-Q. Such risks and uncertainties
also may include, without limitation, the failure to achieve the
expected financial, operational and strategic benefits of the
transactions, or to achieve such benefits in the amounts and within
the time frames currently anticipated; fluctuations in coal and/or
iron ore price, quality or quantities; a reduction of current
reserve estimates; events or circumstances that could impair or
adversely impact the viability of anticipated coal mines; and,
adverse impacts of changes in or the application of governmental
regulation, including difficulty in or the failure to receive,
maintain or modify required environmental permits. Except as
required by law, the company disclaims any obligation to update any
forward-looking statements to reflect future developments or
events.
AK Steel
AK Steel produces flat-rolled carbon, stainless and electrical
steels, primarily for automotive, infrastructure and manufacturing,
construction and electrical power generation and distribution
markets. The company employs about 6,200 men and women in
Middletown, Mansfield, Coshocton and Zanesville, Ohio; Butler, Pennsylvania; Ashland, Kentucky; Rockport, Indiana; and its corporate
headquarters in West Chester,
Ohio. Additional information about AK Steel is available on
the company's web site at www.aksteel.com.
AK Steel owns 49.9% of Magnetation LLC, a joint venture
headquartered in Nashwauk, MN,
which produces iron ore concentrate from previously mined ore
reserves. AK Steel also controls, through ownership and
lease, metallurgical coal reserves exceeding 20 million tons in
Somerset County, PA.
AK Tube LLC, a wholly-owned subsidiary of AK Steel, employs
about 300 men and women in plants in Walbridge, Ohio and Columbus, Indiana. AK Tube produces
carbon and stainless electric resistance welded (ERW) tubular steel
products for truck, automotive and other markets. Additional
information about AK Tube LLC is available on its web site at
www.aktube.com.
SOURCE AK Steel