Hamilton, Ontario-based Stelco Holdings Inc. announced that its wholly-owned subsidiary, Stelco Inc., has entered into a new eight-year pellet sale and purchase agreement US Steel Corporation, which runs until January 31, 2028.
In a press release, the company said the contract provides for the supply of 100 percent of Stelco's anticipated requirements of iron ore pellets at Lake Erie Works over the term of the agreement, including volume required to support the expansion in production projected after the upcoming blast furnace upgrade project. The pellet agreement supersedes and replaces the current agreement with US. Steel which was set to expire on January 31, 2022.
Concurrently, Stelco entered into an option agreement with US Steel granting Stelco a long-dated option to purchase a 25 percent ownership interest in a to-be-formed Joint Venture that will own 100 percent of US Steel's iron ore mine located in Mt. Iron, Minnesota and related infrastructure including the pellet plant.
The Minntac Mine is a fully-integrated iron ore mine operated by US Steel and is the largest iron ore operation in the United States, with annual production capacity of up to 16 million tons per year of iron ore pellets.
Stelco will pay US$100 million, in cash, to US Steel in consideration for the option, payable in five US$20 million installments, with the first installment paid upon closing of the option agreement and the remaining four installments payable every two months thereafter. Upon the exercise of the option, Stelco would pay a net exercise price of US$500 million.