Stelco signs long term pellet supply agreement and option to acquire 25% interest in Minntac with U.S. Steel

Date Closed

April 30, 2020

Lead Office

Toronto

Value

100.00 Million USD

On April 30, 2020, Stelco announced that it had entered into a long-term agreement with United States Steel Corporation ("U.S. Steel") to purchase iron ore pellets which runs until January 31, 2028. The 8-year deal will supply Stelco with 100% of the anticipated iron ore pellet requirements at its Lake Erie Works steel facility. The Pellet Agreement replaces the current agreement with US Steel, which was set to expire on January 31, 2022.

Concurrently, Stelco entered into an option agreement with U.S. Steel to acquire a 25% ownership interest in a to-be-formed joint venture that will own 100% of U.S. Steel’s Minntac mine in Minnesota, the largest iron ore mine in the United States which has annual production capacity of up to 16 million tons. Stelco will pay US$100 million cash for the option, which expires Jan. 31, 2027. Upon the exercise of the Option, Stelco would pay a net exercise price of US$500 million.

The deal secures the future of Stelco's steel production, solidifies its low-cost advantage and increases annual pellet supply to accommodate its higher production capacity.

Stelco is a low cost, integrated and independent steelmaker with one of the newest and most technologically advanced integrated steelmaking facilities in North America. Stelco is based in Ontario, CA, and is a significant economic player for the City of Hamilton and the Canadian steel industry.

U.S. Steel is a Pennsylvania, U.S., based leading integrated steel producer with major production operations in the United States and Central Europe.

McCarthy Tétrault LLP advised Stelco with a team led by Eva Bellissimo and Scott Bergen that included Andrew Parker, Robert Hansen, Roger Taplin, Jake Irwin, Adam Wanke, Claire Lehan, and Etienne Ravilet Guzman (Business), and Oliver Borgers (Competition).

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