POSCO Group's POSCO Holdings has been developing the Australian mining company Roy Hill, which it holds equity in, and has begun integrated operations with another Australian mining company, Atlas Iron, as of the 1st. With significant increases in annual production, this is expected to have a positive impact on POSCO's raw material self-sufficiency.

According to the steel industry on the 22nd, Roy Hill recently integrated its production, management, and operations with Atlas Iron. This decision was made by Hancock Prospecting, the largest shareholder of the two mining companies, and they were integrated into a newly established corporation called Hancock Iron Ore (HIO).

Iron ore mined from the Roy Hill project jointly developed by POSCO and Hancock in Australia is being stored at a local yard. /Courtesy of POSCO

HIO plans to increase efficiency by integrating the operations of Roy Hill, which produces 64 million tons of iron ore annually, with Atlas Iron, which has a production level of around 10 million tons. HIO's annual production will be the fourth largest in Australia, following Rio Tinto (340 million tons), BHP (290 million tons), and FMG (109 million tons).

HIO expects to see benefits such as cost savings and maintaining iron ore quality, as well as flexibility in production schedules through the integrated operations of the two corporations. This is part of a plan to enhance its ability to secure long-term supply contracts with steel mills in Asia.

POSCO, which holds a 12.5% equity stake in Roy Hill, is also expected to benefit positively. POSCO will now be able to procure raw materials from the Atlas Iron-owned mines that are integrated with Roy Hill's operations. The Atlas Iron mines are estimated to contain about 300 million tons of iron ore, including the under-development Mcphee mine.

POSCO invested in Roy Hill in 2010 to increase its raw material self-sufficiency rate. It holds a 12.5% equity stake after investing approximately 1.5287 trillion won. Roy Hill currently supplies about 20% of POSCO's annual iron ore needs. POSCO Group has already recouped its investment in Roy Hill through dividends.

To enhance management stability, POSCO is continuously increasing its raw material self-sufficiency rate. While POSCO's self-sufficiency rate was only 12.4% at the time of the Roy Hill investment, it is reported that the self-sufficiency rate reached around 50% as of the first quarter of this year.

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