KSTL To Pump More Than USD 130 mln Into Iron Ore Development

According to announcement by Mittal Steel Kryvy Rig (KSTL: HOLD), the company plans to invest more than USD 130 mln in the development of its iron ore capacities over the next two years in order to increase ore extraction to 30 mln mt in 2009. In connection with these plans the company raised extraction by 2,287 mt in 2006 by 14%  to 18,296 mln mt. In 2006 KSTL produced 8.7 mln mt of sinter feed (up 10% yoy) and nearly 8 mln mt of sinter up 18% yoy). In 2007 the company wants to extract 20.5 mln mt of iron ore (up 13% yoy), produce 8.3 mln mt of sinter feed and 8.3 mln mt of sinter. Eugene Cherviachenko: The announced large-scale development for KSTL’s iron ore assets is in line with our expectations for the company. In our note on July, 2005 we wrote that “Mittal Steel would benefit the most from its investment in Kryvorizhstal if they capitalized on the company’s iron ore reserves”. Current steps of KSTL towards iron ore business development indicates that our forecast materializes. We think, Mittal Steel is creating value for its whole steel conglomerate by procuring iron ore from Kryvorizhstal’s pits for its steel making assets in Eastern Europe.