ArcelorMittal South Africa is close to a funding deal with the government to keep its steel mills operational, receiving initial support of 500 million rand for workers. The IDC is discussing additional financing and increasing its stake in AMSA. The mills are essential for the economy, especially for sectors like automotive manufacturing, and a decision may be announced shortly.
ArcelorMittal South Africa (AMSA) is approaching a funding agreement with the South African government to sustain its steel mills, vital for the country’s economy. The proposed initial support is around 500 million rand (approximately $28 million), intended to cover steelworkers’ salaries for six to eight months. This deal aims to secure operations at a critical juncture as the mills face closure due to financial constraints.
Additionally, the Industrial Development Corporation (IDC) is in discussions for further bridge financing, which would increase its ownership in AMSA from 8.2%. The government, via the IDC and the trade department, encourages AMSA to evaluate offers related to two mills marked for closure in Vereeniging and Newcastle. Despite the ongoing wind-down process, AMSA is actively seeking funding solutions, having noted that without an agreement, halting the closure plans would be unfeasible.
The mills produce long products in steel, crucial for sectors like automotive manufacturing and mining, which are key to the national economy. A decision regarding the funding deal could be announced imminently, coinciding with an AMSA board meeting to discuss proposals.
AMSA requires approximately 3 billion rand to maintain operations for an additional year, which would help build inventory for car manufacturers such as Volkswagen and Isuzu. The IDC previously supplied AMSA with working capital and continues to engage in discussions for further assistance.
In recent years, AMSA’s operational challenges have been exacerbated by competition from mini mills that use recycled scrap metal, benefiting from government subsidies. This has negatively impacted AMSA’s market standing, with its stock price plummeting over 90% since 2005, yet it experienced a temporary surge of 21% due to optimism surrounding the funding discussion.
ArcelorMittal South Africa is on the verge of securing government funding crucial for maintaining its steel mills, which play a significant role in the nation’s economy. Initial support, along with potential bridge financing from the IDC, aims to stave off operational closure. The decision regarding the deal might arrive soon, highlighting the urgency of stabilizing AMSA’s financial situation and ensuring the continuity of steel production vital for various industries.
Original Source: www.mining.com
