Essar Global on Wednesday announced the acquisition of Minnesota Steel, a US-based privately held company with iron ore reserves of 1.4 billion tonne, for an undisclosed amount.
Industry sources said Essar would pay around Rs 350 crore (Rs 3.5 billion) for the acquisition. Minnesota Steel is setting up an integrated steel plant with an annual capacity of 2.5 million tonne with an investment of $1.65 billion by making use of its iron ore mines. However, there was no official word on the deal size.
The construction of the project, the first of its kind in North America, is expected to begin in the third quarter of this year. Production at this unit, which is being built on the Mesabi iron range in northeast Minnesota, will start in 2009.
The announcement came three days after Essar Global acquired Canadian steel major Algoma, which supplies sheets to US carmakers, including General Motors Corp and Ford Motor Co, in an all-cash deal worth $1.6 billion (nearly Rs 6,800 crore) through its wholly owned subsidiary Essar Steel Holdings.
Essar Global chairman Shashi Ruia said: "Our investment in Minnesota Steel is exciting as it gives us a cornerstone in the North American market. From this, we will further expand our global steel business. By developing this significant iron ore resource, Minnesota Steel has the opportunity to be one of the low-cost producers of steel in the world."
Minnesota Steel is controlled by Minnesota families, who more than a century ago began investing in the iron ore mining business in the state.
In addition to the 2,000 construction jobs, Minnesota Steel will create up to 700 full-time jobs and generate 2,100 spin-off jobs. In December, Minnesota State approved a 7,000-plus acre land swap to ensure Minnesota Steel will have enough acreage for its operation.
In November, Minnesota Steel secured capacity to transport low-cost natural gas from Alberta, Canada, through the Great Lakes Gas Transmission Co, locking in transport capacity, which is extremely limited, and saving up to 70 per cent on transmission rates.
