ArcelorMittal, the world’s largest steelmaker, is eyeing a stake in the Kolkata-based steel and wire producer, Ramsarup Industries.
Ramsarup has two iron ore leases in Orissa. It acquired Balasore Minerals in 2008, which came with iron ore, limestone and dolomite mines. Sources in Ramsarup said the company was in discussion with global companies, including ArcelorMittal, for a strategic stake in their company. An ArcelorMittal spokesperson said, “We don’t comment on market rumours.”
The deal, if it happens, could have a mezzanine structure, where convertible warrants would be issued and on conversion would translate into a 25 per cent equity. Later, the strategic investor could raise holding in the company.
Shares of Ramsarup closed 0.4 per cent down at Rs 73.45 on the Bombay Stock Exchange. The promoters’ holding was 75.9 per cent as on March 31.
Industry sources said for ArcelorMittal the mining leases would make more sense than acquiring a small steel and wire producer. In 2008, ArcelorMittal was allocated a mining lease in the Karampada iron ore deposit for its steel plant. However, the Karampada deposit has reserves of only 65 million tonnes and ArcelorMittal’s requirement is 600 million tonnes over a 30-year period.
Ramsarup’s two iron ore mines in Orissa have reserves of 7.1 million tonnes and 45 million tonnes. Iron ore production is likely to start from April 2011. ArcelorMittal has a 12-million tonne steel project in Orissa and the company is yet to bag any iron ore mine in the state.
Ramsarup has two wire drawing facilities — at Durgapur and Kalyani in West Bengal — with capacities of around 0.7 million tonnes.
Steel players are vying for captive raw material resources in the wake of the volatility in prices. Moreover, with most of the suppliers moving into shorter pacts, the uncertainty in prices can only increase in the near future. Iron ore accounts for around 35 per cent of the cost of production.