The Australian reported that Arrium is considering expansions that could grow a key minerals processing business by more than 20% over the next 5 years through plants in Canada, Brazil and Peru.
Mr Andrew Roberts consumables boss of Arrium's mining said that to keep pace with expected mine growth in North and South America, the company was looking at adding combined capacity of about 250,000 tonnes a year of so called steel grinding balls to service growth in copper, gold and iron ore mines, on top of 90,000 tonnes already in construction.
Mr Roberts, the Arrium executive who in 2010 oversaw the company's USD 932 million takeover of AngloAmerican's mining consumables businesses in the Americas said that "We're certainly going to have to do some more. There is strong growth planned in copper and gold and we are going to take the opportunity in volume, rather than to substantially drive improvement in margins."
Grinding balls are used for fine grinding of mineral ore particles and can also be used for the pulverizing of coal, cement and other building materials.
The move by Arrium, formerly known as OneSteel, into mining consumables is part of departing chief executive Mr Geoff Plummer's long time strategy to move the company's dependence away from the struggling Whyalla based steel business and more into mining linked businesses. This strategy also has Arrium set to become the country's fourth biggest iron ore exporter, which is where most of the near term potential earnings growth for Arrium resides.
The relatively stable mining consumables business has been somewhat overlooked and executives think, undervalued as analysts and investors concentrate on the potentially high margin iron ore business and troubles at the company's steelmaking division.
Likewise, when South Korean steel giant POSCO earlier in the year joined forces with Hong Kong trader Noble Group to unsuccessfully try to take Arrium over for USD 1.2 billion or 88c a share, debate was over whether the steelmaking business or the iron ore mines were the main target.
Mr Roberts a BHP Steel veteran who is one of the potential candidates to replace Mr Plummer when the CEO retires next year, saying that mine volume growth should transfer to the bottom line of the consumables business, whose profit he has grown in each of the 3 halves since the acquisition.
He said that "We're expecting very strong demand from copper and gold to drive grinding media in South America and North American through 2016-17. We're confident earnings are going to grow in line with volume."
In Chile and Peru, where Arrium is targeting copper and the northwest of Canada, where gold is the prize, mining volumes are set to grow at a compound rate of 12% to 14%.
