ArcelorMittal South Africa is close to securing a funding deal to keep its mills operational, with initial government support of 500 million rand planned for worker salaries. The government aims to facilitate additional financing through the IDC, while AMSA explores offers for mills set for closure. Maintaining operations is critical for the economy, especially in the automotive sector.
ArcelorMittal South Africa is approaching a funding agreement aimed at supporting its operations, which are vital to the nation’s economy. Recent discussions have included a proposed initial government support of approximately 500 million rand ($28 million) to cover steelworkers’ salaries for a period of six to eight months. This funding is crucial for maintaining the company’s operations and employment levels in South Africa.
Furthermore, the government, through the Industrial Development Corp (IDC), is contemplating additional bridge financing to increase its stake in ArcelorMittal SA, currently at 8.2%. The IDC and the trade department are also encouraging AMSA to explore offers for two mills that it intends to close, located in Vereeniging and Newcastle.
Despite ongoing plans to wind down operations, AMSA remains engaged with stakeholders regarding funding solutions. The company stated that without resolving funding issues, delays in closing operations would be impractical. While it has received inquiries on strategic alternatives, these do not currently reflect any firm offers.
Keeping the steel mills operational is crucial for the government’s economic revitalization strategy, particularly as they produce long steel products that local competitors cannot manufacture. A decision regarding the funding deal may be announced imminently, as AMSA’s board convenes to evaluate proposals aimed at sustaining mill operations for an additional year.
The company, under the backing of Indian billionaire Lakshmi Mittal, is seeking approximately 3 billion rand to ensure the continuity of its mills while building inventory for automotive manufacturers such as Volkswagen AG and Isuzu Motors Ltd. The IDC is in discussions with AMSA but has not commented on potential bids related to the mills.
Previously, the IDC had provided working capital to AMSA, demonstrating its commitment as the steelmaker’s primary shareholder. The IDC also aims to foster growth in the manufacturing sector by investing in a new 12 billion-rand automotive plant, highlighting the strategic significance of AMSA’s products, which include high-demand grades of steel used in vehicle production.
AMSA faces competition from smaller mills that utilize scrap metal, often at lower costs due to government incentives, potentially affecting AMSA’s market position as iron ore is more expensive. Notably, AMSA’s share price has plummeted by over 90% since late 2005 but saw a temporary rise of up to 21% recently amid discussions about funding solutions.
The imminent funding deal for ArcelorMittal South Africa indicates substantial governmental effort to sustain critical steel production and employment. With both initial and potential further funding under consideration, there is optimism for the company’s operational continuity. Such measures are integral to the government’s broader economic strategies, especially given the manufacturing sector’s reliance on steel production for automotive and infrastructure needs.
Original Source: www.mining.com
