Steel giants clash in court over Labrador iron ore mineadmin
The two global steel giants that snapped up Canada’s two largest steel makers are battling in court over a soured deal involving a jointly owned iron ore mine in Labrador.
ArcelorMittal Dofasco Inc. is suing U.S. Steel Canada Inc. (the former Stelco Inc.) and mining company Cleveland-Cliffs Inc. after ArcelorMittal’s an agreement to buy out its two partners in the iron ore mine collapsed.
The suit seeks $427-million in damages and a court order forcing U.S. Steel Canada and Cleveland-Cliffs to sell their interests in the Wabush Mines JV or $1.8-billion if ArcelorMittal is not awarded the mine.
In the fall of 2006, the three owners decided to sell the mine, but ArcelorMittal changed its mind in March, 2007 and decided to hold on to its 28.6 per cent stake.
In June, 2007, Cleveland-Cliffs and U.S. Steel Canada agreed to sell their combined 71.4 per cent stake to another mining company.
ArcelorMittal exercised its right to match the offer, but said in a statement of claim filed with the Ontario Superior Court of Justice that its partners in Wabush began delaying the transaction as the price of iron ore started rising on world markets.
â€œ[Cleveland] Cliffs and U.S. Steel were motivated to delay regulatory approvals (and thus closing) in part because each company determined (following investigations and analysis) that world iron ore was becoming a valuable higher-priced commodity,â€ ArcelorMittal said in allegations that have not been proven in court.
In its court filing, ArcelorMittal pointed to an announcement on Feb. 18, 2008, that the world’s largest iron ore producer had won price increases of 65 per cent from its customers.
â€œIt is therefore clear that as of Feb. 18, 2008, that iron ore had become a scarce and highly valuable commodity,â€ the court filing said.
ArcelorMittal said it was willing to increase spending on the mine and its related operations to $150-million during the next four years from the existing plan of $89-million but only if it had complete control of the mine.
Because it doesn’t own the entire mine, ArcelorMittal said, it is sustaining damages of $16.25-million a month this year and estimates damages in 2009 will be $19.39-million a month.
U.S. Steel spokesman John Armstrong said the company does not comment on litigation.