Korea Investment PE to receive largest dividend ever from iron ore investment AMMC's financial performance has improved thanks to higher iron ore prices

Translated by Kim So-in 공개 2021-09-17 12:57:56

이 기사는 2021년 09월 17일 08:08 더벨 유료페이지에 표출된 기사입니다.

Korea Investment Private Equity (Korea Investment PE) is expected to receive largest dividend ever from its investment in ArcelorMittal Mines Canada (AMMC), thanks to a rise in iron ore prices.

AMMC, Canada's iron ore mining company, recorded revenue of 2.1 trillion won ($1.8 billion) with an operating profit of 1.29 trillion won in the first half, according to industry sources on Wednesday. Its revenue increased by 89.6% and operating profit more than tripled year-over-year.

AMMC’s strong financial performance is attributable to higher iron ore prices, which rose to a 10-year high during the first six months of this year. CME iron ore prices once surged to over $210 a ton in June, which is more than five times higher compared to the low set at the end of 2015.

The higher iron ore prices have pushed up AMMC’s iron ore products. AMMC mainly produces iron ore concentrate and pellets. The two products’ average selling price per ton more than doubled in the first half compared to the same period last year.

AMMC seems to have further boosted its financial performance by focusing on pellets, which are relatively more expensive. The company’s combined production of concentrates and pellets reportedly decreased slightly in the first half compared to a year ago. But, it increased the production of pellets while reducing the production of concentrates, which contributed to the improvement in earnings.

If the current trends continue, AMMC will likely be able to maintain its earnings before interest, tax, depreciation, and amortization (EBITDA) margin over 60% until the end of this year. AMMC had continued to pay dividends and recorded EBITDA margin of 20-30% even when iron ore prices fell to $40 per ton in 2014-2015.

Korea Investment PE is expected to receive a dividend of around 59 billion won from AMMC based on the financial performance in the first half, which will be the largest ever since its investment in the company in 2013.

Korea Investment PE acquired a 15% stake in AMMC by establishing EQP POSCO Global 1 Overseas Resource Development PEF along with POSCO and Taiwan’s China Steel in 2013. Korea Investment PE invested 668 billion won to secure a 51.8% stake in the fund. It set the investment period at 10 years to exit its stake in the company in 2023.

It is said that a growing number of companies seek to buy AMMC’s high purity iron ore products, with more companies paying attention to ESG (environment, social, and governance) management.

“The EQP POCSO 1 fund is drawing stronger attention from the investment industry due to an increase in dividends and the strengthening of ESG management,” said an industry source. “I heard that several investors at home and aboard have approached Korea Investment PE about the purchase of its stake.” (Reporting by Byunkeun Kam)
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