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    ArcelorMittal Sees Rio, BHP Losing Grip With Liberia Exploits

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    ArcelorMittal Sees Rio, BHP Losing Grip With Liberia Exploits

    Post by sang_garuda on Sun Aug 17, 2008 7:16 am

    Two watchmen, taking shade from the equatorial sun under the arm of a rusting electric earth mover, are guarding the future of ArcelorMittal, the world's largest steelmaker.

    The men, clad in faded cotton shirts, survey a 50-story pyramid of earth marking the Nimba iron-ore mine in Yekepa, Liberia. ArcelorMittal plans to reopen the operation in 2009. The mine was abandoned in 1992 as civil war engulfed the nation.

    Liberia is the center of ArcelorMittal's strategy to boost profits by producing its own ore. The company, reacting to a fivefold jump in costs since 2001, is scouring the globe for deposits and plowing $6 billion into nations such as Senegal and Mauritania with histories of civil strife. Liberia was torn by mortar fire and reports of ritual killings five years ago.

    Twenty-one months after Mittal bought steelmaker Arcelor for $38.1 billion, the company's goal is to develop overlooked mines to break the grip of the three largest ore producers, BHP Billiton Plc, Rio Tinto Plc and Brazil's Cia. Vale do Rio Doce.

    ``Few companies are as driven to expand their captive iron- ore supplies as ArcelorMittal, which stands to gain competitive advantage from its efforts,'' says Michelle Applebaum, who runs a steel research firm that carries her name in Highland Park, Illinois, and has a ``buy'' rating on the stock. ``ArcelorMittal is far more aware than most that controlling your own destiny means controlling your own iron ore.''

    Increasing Production

    BHP, Rio and Vale control about 80 percent of seaborne trade in iron ore, and Luxembourg-based ArcelorMittal agreed in April to pay Vale 87 percent more for ore as demand surges in China. ArcelorMittal plans to produce 80 percent of its ore in the next decade, up from 45 percent now, to maximize profits from U.S. steel prices that are at a record-high $1,068 a ton.

    The company may save billions of dollars a year, says Charles Bradford, a mining analyst at Soleil Securities Inc. in New York who has followed mining companies for more than 25 years and rates ArcelorMittal a ``hold.'' The precise benefits won't be known until production proceeds, he says.

    ArcelorMittal's $1.5 billion Liberia investment is aimed at trimming costs to end earnings swings that can weigh on its stock.

    The company's shares gained 23 percent in the 12 months ended Aug. 14, outperforming a 7.2 percent decline in the Bloomberg World Iron/Steel Index. Vale, based in Rio de Janeiro, rose 2.8 percent, while Melbourne-based BHP's London-traded shares climbed 10 percent and London-based Rio Tinto gained 51 percent in that time.

    Civil War Wreckage

    ``Most people look at ArcelorMittal as a steel company and ignore that it's 45 percent integrated in iron ore and going to grow that significantly,'' says Sanford C. Bernstein & Co. analyst Andrew Keen in London, who has an ``outperform'' rating on the shares.

    Among the largest steel producers, ArcelorMittal leads in raw materials exploration. Tokyo-based Nippon Steel Corp. and JFE Holdings Inc., the world's second- and third-largest steel companies, rely on imported ore. The companies need to invest in exploration to reduce costs, Masaki Ishikawa, director of the iron and steel division at Japan's Ministry of Economy, Trade and Industry, said July 22.

    ``We as the steel industry should not have so much market dominance on the raw materials side,'' says Malay Mukherjee, ArcelorMittal's former head of mining and a member of its board.

    The risk of ArcelorMittal's strategy is visible in Liberia, where a 14-year civil war left potholed roads, a dearth of power plants and an unemployment rate of 85 percent.

    `Big, Big Undertaking'

    ArcelorMittal says it expects 12.5 million tons of ore a year -- 21 percent of the company's production -- from Nimba, located in Northwest Liberia on a finger of land jutting into neighboring Guinea. A 7-hour drive along bush roads from the capital, Monrovia, underlines the challenges before ArcelorMittal's shipments start next year.

    The rail tracks that will take the ore 162 miles (260 kilometers) from Yekepa to the port city of Buchanan shimmer in the heat, overgrown with plants and stained with rust. Wet- season rains have rotted ties and thieves have stolen parts of the rail. There's no power for a signaling system.

    ``This is a big, big undertaking,'' says Thomas Johannisson, a geologist formerly with the Liberian American Swedish Mining Co. before it stopped production, who has returned to Liberia as an ArcelorMittal consultant. ``We have to find all the old maps, figure out where the electricity cables are.''

    The World Bank says it is spending about $126 million on road, water and electricity repairs in a country where 48 percent of the population lives in ``extreme poverty'' and life expectancy is about 40 years.

    Terrorism, War

    ArcelorMittal's strategy will lead the company to spend $2.2 billion on a mine, port and railway in Senegal to try to produce 25 million metric tons of ore a year -- the company's largest investment on the continent outside South Africa. The Senegalese army is waging one of Africa's ``longest-running and seemingly most intractable conflicts'' against rebels, according to a United Nations report on July 23.

    The company won't say how much it will spend on a 30 percent stake to develop the Mauritanian El Agareb iron-ore mine, which contains an estimated 1 billion tons. The mine would be one-fortieth the size of Bolivia's El Mutun mine, the world's largest, with 40 billion tons of iron ore. Mauritania's Societe Nationale Industrielle et Miniere, controlled by the state, will hold the remaining 70 percent of El Agareb.

    Slavery in the country has persisted, the United Nations reported April 23. Mauritania faces a ``growing terrorist threat'' after al-Qaeda killed four French tourists in December 2007, the UN said.

    Riots, Ritual Killings

    The end of war has led the company to invest in Liberia, about the size of the U.S. state of Tennessee. It was settled by freed American slaves from 1822 through the 1860s and is the oldest independent country in Africa. The UN maintains about 15,000 peacekeepers in Liberia after former President Charles Taylor, who is on trial for war crimes in The Hague, was forced into exile in Nigeria in 2003.

    ``Do we have long-term stability in Liberia? It's difficult to judge,'' says Harry Cooper, a spokesman for ArcelorMittal in the country. ``Liberian politicians have always been tempted to use the security forces to perpetuate themselves and there is no guarantee that mentality has changed.''

    As recently as November 2005, a U.S. State Department report said a dusk-to-dawn curfew was imposed in Maryland County, Liberia, the previous January ``after riots broke out over the government's failure to address a spate of ritual killings.''

    Looted Ruins

    The instability is reflected in the road from Monrovia to Nimba, which passes nine checkpoints, four for UN military and five staffed by police. About 80 miles from Yekepa, a bridge has collapsed and wrecked cars sit in the river bed. At the Yekepa compound, 1,500 staff houses are in ruin, their roofs and windows looted in the war.

    The company increased its Liberia investment in December by 50 percent to $1.5 billion, partly because of overruns. ArcelorMittal may need to build a 120-megawatt power plant, says Joseph Matthews, the executive overseeing its Liberian business from the country.

    ``We want to be leaders in going into challenging areas,'' Matthews says. ``Liberia's bark is a whole lot worse than its bite. I feel a lot safer in Monrovia than I feel in the middle of Johannesburg or in parts of Rio in Brazil.''

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    Re: ArcelorMittal Sees Rio, BHP Losing Grip With Liberia Exploits

    Post by Prodip2007 on Sun Aug 17, 2008 10:13 am

    ------||------------||------nice sharing bro.Tq u bro...Tq u very much...Keep up bro------||------------||------

      Waktu sekarang Mon Jun 25, 2018 4:50 pm