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MMK sells iron ore Kulmyakovsky site

27 August 2014

Changing its strategy Magnitogorsk Metallurgical Combine, which is no longer focused on the increase in the raw material base, gave impetus to the sale of iron ore Kulmyakovskogo site. His acquisition of the combine in 2011 was to ensure the production of its own raw materials. However, the rejection of the previously elaborated strategy Analysts little surprised — given the current state of the economy, companies have shown little desire to make investments in the long-running projects.

August 12 The Board of Directors decided to Magnitogorsk combine to make the sale of LLC «Kulmyakovskogo ', the license holder for the development of iron ore Kulmyakovskogo area in the Chelyabinsk region. The initial cost of land bought out by CMI in 2011 at the auction amounted to 25 million RUB, while the calculated resources of his not too impressive — P1 category they constitute 20 million tonnes and category P2 60 million tons… Even with the confirmation of P1 category, given the annual ore consumption in the amount of 18−19 mln. Tons of plot reserves have been depleted for the year.

Company officials refuse to discuss the decision, pointing out that the negotiations for the sale at the moment is still under way, and does not give any explanation regarding the implementation of other assets. MMK, providing the raw material itself is only 19%, the rest have to buy the «Metalloinvest» of ENRC and, therefore, for a more complete filling of the raw material base and was purchased Kulmyakovsky site. Strategy of the company changed in late 2012, and the new development plan, calculated up to 2022, does not consider the purchase of raw material assets a priority.

Due to the rather conservative attitude, negating long-term projects and investment in their company, and ignores the high profitability of iron ore sector, which is able to provide the difference between the cost of raw materials and the final price of 35−40%. According to information data CME ore cost in Tianjin with an iron content of 62% in June was 89 USD per tonne in August, is this a record low of almost 2 years has jumped to the level of 93.75 USD per tonne. If you believe the promises of analysts «Goldman Sachs», this year's ore costs 106 USD / ton, but the next year the price will drop to 80 USD. Persistently low-cost steel, together with concerns about the recovery in the event of a new crisis would explain the conservatism of metallurgists.

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