Stelco Holdings Inc. has bought into one of the largest iron ore mines in the U.S., according to the Hamilton, Ont., steel manufacturer.
The deal includes a new eight-year pellet sale and purchase agreement with United States Steel Corporation that lasts until Jan. 31, 2028.
Under the agreement, U.S. Steel will provide all of Stelco’s iron ore pellets for its Lake Erie Works steel mill, located in Nanticoke, Ont., and replaces a current agreement set to expire on Jan. 31, 2022.
Stelco will pay $100 million in cash for a 25 per cent ownership interest in the Minntac Mine pellet plant in Mountain Iron, Minn., which has a production capacity of up to 16 million tons of ore per year.
The agreement includes material required to support an expansion projection after a blast furnace upgrade.
“This transaction represents a major milestone for Stelco, as it secures a long-term supply of high-quality iron ore pellets and a highly valuable future option to acquire a 25 per cent ownership interest in the Minntac Mine, one of, if not the, best assets on the iron range,” said Alan Kestenbaum, Stelco’s executive chairman and CEO.
The announcement comes as Stelco gets ready to announce its earnings for the first quarter of 2020 on Tuesday.
The company is expected to reveal it was sold out in the first quarter with $445 million in revenue and adjusted earnings before interest, taxes, depreciation and amortization of $20 million.
In March, Stelco hired a new chief financial officer, Paul Scherzer, a Montreal-born metals and mining investment banker with nearly 25 years of experience.
The appointment came after the steel maker announced a $24-million loss for the quarter ending Dec. 31, 2019. The company said 2019 revenue totalled $435 million, down from $648 million a year earlier.