Bluescope, is placing its Taharoa ironsands mining operation on the market
New Zealand Steel's Australian owner, Bluescope, is placing its Taharoa ironsands mining operation on the market after declaring a $A47.1 million ($NZ50.70m) loss on an underlying earnings before interest and tax basis for the first half of the current financial year in its Kiwi operations, driven by the falling value of steel and iron ore.
NZ Steel has mined ironsands on beaches south of the Manukau Harbour since 1972 and in 2008 attempted to sell the operation rights to Hong Kong tycoon Li Ka-shing's Cheung Kong Infrastructure Holdings, only to be knocked back by the Overseas Investment Office.
The sands are used at the Glenbrook steel mill, south of Auckland, and for export to Asian steel mills in dedicated ships.
The ironsands are owned by the Maori incorporation, Taharoa C block, which gave mining rights to New Zealand Steel under a 70-year lease.
The Taharoa operation was valued at $NZ250m in the failed 2008 transaction, which was refused on the grounds the ironsands were on "sensitive land" and the sale would not produce "substantial and identifiable benefit."
Bluescope wrote off the whole $A162.7m ($NZ175.13m) carrying value of its Taharoa iron sands fixed assets in its first-half results - essentially declaring as worthless the capital equipment used in the operation, despite some NZ$16 million in capital expenditure upgrades being committed through to March 2016.
The Taharoa operations are expected to record an ebit loss of between $NZ25m and $NZ30m in the current financial year.
The company says it achieved $NZ13m of savings in the first-half, and expects to achieve savings of between $NZ20m and $NZ25m in the second half, for full-year savings of between $NZ33m and $NZ38m.
Total revenues from New Zealand operations in the half year were $A451.5m ($NZ485.98m), compared with $A489.9m ($NZ527.31m) in the same period a year earlier. Total steel dispatches fell from 387,000 tonnes to 365,800 tonnes, while underlying ebit fell from $A2.6m ($NZ2.80m) positive earnings to a loss of $A47.1m ($NZ50.70m).