Russian steelmaker MMK eyes iron ore assets for acquisition

Russian mining and steel company MMK is eyeing iron ore projects for acquisition, MMK's majority shareholder and board chairman Viktor Rashnikov said during the company's Capital Markets Day.

MMK is prepared to spend a part of its EBITDA – which this year will reach a historic high, possibly in excess of $3.5 billion, based on nine-month earnings -- to finance an acquisition of a suitable iron ore asset.

The Urals-based company's self-sufficiency in the raw material -- through its mining subsidiary in the Chelyabinsk region -- declined to 17% in 2020, according to the company's annual report. Self-sufficiency in cocking coal was 40%, in steel scrap 65% and in power generation 75%, the report said.

"We are looking, but have not yet seen a worthy iron ore project, which would not have already been integrated into some company. As soon as such an asset appears, we would consider buying it," said Rashnikov, adding that the company was not experiencing problems with iron ore procurement, but that a new captive iron ore asset would be convenient.

In 2020, MMK's captive iron ore concentrate output totaled 2.9 million mt, of which 1.6 million mt/year was its substitute -- the by-product of the in-house recycling of slag. To make 11.6 million mt of crude steel that year, the company had to buy 8.9 million mt of concentrate.

The quest for an expansion of iron ore reserves was most likely rekindled by sharp spikes to historic highs in iron ore and coking coal prices over July-September, even though they were more than offset by robust steel prices.

MMK says it believes iron ore will stay in a range of $90-$120/mt, which it finds adequate, and expects coking coal to correct down to $150/mt.