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Pellets aplenty for Sault steel maker

Essar Steel Algoma locks up supply deal with Cliffs

Potential new ownership of a Sault Ste. Marie steelworks will have some certainty over a key material needed in the steelmaking process.

Essar Steel Algoma announced Dec. 30 that the Ontario Superior Court of Justice has approved a term sheet between Algoma and Cliffs Mining Company for the supply of iron ore pellets starting on Jan. 1 and extended through Dec. 31, 2020, with a proviso for a one-year extension.

The term sheet, when combined an existing pellet sale and purchase agreement, locks up 70 per cent of the steel operation’s pellet requirements.

“This term sheet comes as a result of a competitive process that secures the economic provision of this critical raw material for Algoma,” said Essar Steel Algoma CEO Kalyan Ghosh in a news release. “It represents an important milestone in moving Algoma towards a successful restructuring and emergence from CCAA proceedings.”

The former Algoma Steel has been operating under creditor protection with insolvency proceedings underway. The deadline for finalizing a sale or restructuring proposal is Jan. 31.

The new supply agreement calls into question whether the Ohio iron ore miner will be dealing with an entirely new ownership group at Algoma in 201; one with no connections to Essar.

A SooToday report said the agreement contains a clause to terminate the deal if the steel operation is acquired by any entity with ties to the Mumbai-based Essar Global, according to documents posted by Ernst & Young, the court-appointed monitor.

In recent years, Cliffs and Essar Steel Algoma have come to frequent legal blows over their pellet supply agreement that at one point, in October 2015, prompted Cliffs to terminate the supply agreement until a settlement was reached last April.