Brazil-based Companhia Siderurgica Nacional (SID), or CSN, recently announced to have increased its ownership stake in Riversdale Mining Limited, an Australian mining company.
The company acquired approximately 5.5 million common shares of Riversdale for roughly A$88.0 million. The shares acquired increased CSN’s stake in Riversdale to 19.9% from 17.58% earlier.
Riversdale aims at becoming a major mining company with its diversified portfolio of assets around the world as it seeks to enhance its presence by investing in suitable mining opportunities. The company entered into a definitive agreement with Rio Tinto (RIO) on December 23, for the acquisition of its entire outstanding shares for A$16 per share (total consideration A$3.9 billion).
The agreement entered into has been extended by Rio Tinto to March 4 following CSN’s stake increase in Riversdale. Rio Tinto, currently holds a 14.96% stake in Riversdale with a 24.1% interest, while Tata Steel Ltd. is still the largest holder in Riversdale.
We find the growth prospect of Companhia Siderurgica encouraging considering the various projects that are being carried out by the company. Its entrance into the cement business seems to be an added advantage.
Global steel demand in the quarters ahead is expected to get a boost from the reviving global economy, increasing private and public capital spending, falling unemployment levels and growth of the emerging economies, especially China and Brazil. Further, steel demand in Brazil will get a boost as the country will host the 2014 World Cup soccer championships and the 2016 Rio de Janeiro Olympics.
Despite these positives, the growth momentum gets restricted because of the possibilities of weak results in the quarters ahead, while mounting debt level, high cyclicality, growing competition in the industry and rising manufacturing cost remain the prime causes of concern.
CSN produces hot- and cold-rolled flat steel, galvanized sheets, and tin plates for the packaging, automotive and construction industries. The company faces stiff competition from Usiminas, Arcelor Mittal (MT) and Metalúrgica Gerdau.
ARCELOR MITTAL (MT): Free Stock Analysis Report
RIO TINTO-ADR (RIO): Free Stock Analysis Report
CIA SIDERUR-ADR (SID): Free Stock Analysis Report
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