Home World Business Arrium closer to salvation as Korean bidders get nod

Arrium closer to salvation as Korean bidders get nod

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Resolution of the future of Australia’s second largest steel producer has taken a big step forward, with a Korean consortium beating out a UK bidder to enter into the final negotiations buy Arrium.

The company, which controls steel plants in South Australia, Victoria and NSW, collapsed 14  months ago, hurt by commodity price swings which 

The winning bidder for Arrium has been selected, although financial details have yet to be finalised The winning bidder for Arrium has been selected, although financial details have yet to be finalised Photo: David Mariuz

KordaMentha, which took control of the sprawling group when it entered administration, said late Thursday it had chosen the Korean consortium as the preferred bidder. It includes Pohang Iron and Steel, one of the largest steel producers in the world.

Arrium produces long steel products at its steelworks in Whyalla, South Australia, as well as operating electric arc furnaces in Melbourne and Sydney, which melt down scrap steel to produce steel products. This part of the group is believed to have traded profitably throughout the group’s financial woes.

The members of the winning consortium are Newlake Alliance Management and JB Asset Management. The underbidder was Liberty House group of the UK.

Financial details of the transaction are unclear, as is the level of state and federal government financial support for Arrium.

The Korean consortium is expected to alter part of the steelmaking process to enable it to use less expensive coal than the high-priced coking coal which is at the centre of existing steelmaking processes, when producing molten iron. The amount of the capital investment needed for the new process is also unclear.

Critical to completing the deal is finalising the degree of financial support from government with negotiations to be held with the federal and South Australian governments to clarify their “investments in the future of Arrium’s operations in Whyalla”, KordaMentha said in a statement.

Concluding the sale depends on winning the approval of the committee of creditors of the failed company along with the Foreign Investment Review Board. Mark Mentha said: “After a 14-month administration and a nine-month sale process, we are now an important step closer to providing certainty to employees, creditors, suppliers, customers and the Whyalla community,” Mark Mentha said in a statement.

Mr Mentha said he could not provide further details yet because of commercial confidentiality.

Prior to concluding the deal, Arrium sold off its Molycorp mine mill products unit for $1.6 billion, as part of its reorganisation.

The collapse of the price of iron ore brought Arrium undone, since it had built up a sizeable export business from its south Australian mines.

The more recent recovery in the price of the steel raw material is believed to have helped improve the group’s finances, but it had been weighed down by a high level of borrowings when it was spun-out of BHP as OneSteel more than a decade ago.

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