AK Steel has received an award for “Best Mergers and Acquisitions” from American Metal Market (AMM), a leading metal industry publication. The award recognizes the company’s ongoing progress in developing its strategic investments in Magnetation LLC and AK Coal Resources – acquisitions that were initially announced in 2011.
Those operations will provide the company with approximately 50 percent of its annual iron ore and metallurgical coal requirements in 2015. By becoming more vertically integrated in this regard, AK Steel will gain greater control over its cost structure, enhance its raw materials self-sufficiency and benefit from a financial hedge against global market price increases for those critical steelmaking inputs.
“It is an honor to receive this prestigious recognition from American Metal Market,” said James L. Wainscott, Chairman, President and CEO of AK Steel. “We believe that our strategic investments in iron ore and met coal will be game-changers for the company, unlocking significant value for our shareholders by the year 2015.”
As announced in October of 2011, AK Steel formed Magnetation LLC, a joint venture with a private company, to produce iron ore feedstock and pellets from legacy reserves in Minnesota. The joint venture utilizes magnetic separation technology to recover iron ore from existing stockpiles of previously mined material. This eliminates the need for traditional drilling, blasting and excavating, and can result in the creation of new wetlands in an environmentally responsible manner. AK Steel expects that when fully operational, Magnetation will potentially create savings of as much as $130 million per year – assuming IODEX prices of around $140 per ton. These benefits are derived from displacing 50 percent of AK Steel’s purchased pellets with its own pellets, as well as discounted pellet pricing and transportation savings.
In 2011, AK Steel also acquired metallurgical coal interests in Pennsylvania and formed AK Coal Resources, Inc., a wholly-owned subsidiary. As a result, AK Steel now controls, and is developing, more than 20 million tons of low volatile met coal reserves in Somerset County, PA. The company anticipates that AK Coal Resources will create savings of as much as $40 million annually when fully operational – assuming open market low-vol met coal prices of $130 per ton. Together, Magnetation and AK Coal Resources are expected to enhance the long-term profitability of AK Steel in a meaningful way.
In addition to the award for “Best Mergers and Acquisitions,” AK Steel was named a finalist for AMM’s 2013 award for “Steel Producer of the Year.” The company received the AMM award for “Best Operational Improvements” in 2011, as well as AMM awards for “Steel Producer of the Year” and “Best Turnaround of the Decade” in 2010.