AK Steel formed a joint venture with an existing company that will produce iron-ore concentrate, a feedstock for iron-based steelmaking raw materials. In a separate transaction, AK Steel acquired all of the stock of a company with significant reserves of low-volatile metallurgical coal used to produce fuel for iron-making blast furnaces, which AK Steel operates in Middletown, Ohio, and Ashland, Ky. AK Steel’s investment in iron ore was made through a joint venture with Magnetation Inc., a private company headquartered in Nashwauk, Minn., which recovers high-purity iron concentrate from legacy reserves of previously mined ore deposits. AK Steel also acquired all of the stock of Solar Fuel Company, a private company that controls, through ownership and lease, estimated reserves exceeding 20 million short tons of low-volatile metallurgical coal in Somerset County, Pa.
AK Steel owns 49.9% of the new joint venture, named
Magnetation LLC, which currently produces about 400,000 metric tons of iron-ore
concentrate annually from a plant near Keewatin, Minn. The joint venture is
constructing a second plant near the existing operation with a targeted annual
capacity of approximately 1 million metric tons. The joint venture expects to
expand to a rate of about 3.5 million metric tons annually by 2016 with a total
of four concentrate plants. AK Steel will contribute a total of $297.5 million
for its interest in the joint venture, funded over several years.
In addition, AK Steel will pay $36
million in cash for the coal company, which the company plans to rename AK Coal
Resources. AK Steel expects to invest approximately $60 million in AK Coal
Resources to develop its mining operations and begin coal production.