By Dayton Business Journal

AK Steel has scooped up a coal company and signed a deal to be partners in another raw materials business.

On Wednesday, West Chester-based AK Steel â¿¿ the largest company in the Dayton region â¿¿ announced it will pay $36 million to acquire Pennsylvania-based Solar Fuel Company Inc., which controls an estimated 20 million tons of low volatile metallurgical coal. That coal is used to produce fuel for iron-making blast furnaces, which AK Steel operates in Middletown and Ashland, KY.

AK Steel expects to invest about $60 million in Solar Fuel, which will be renamed AK Coal Resources Inc., to develop its mining operations and begin coal production. It is expected to provide the steelmaker with significant cost savings through direct consumption and third party sales.

AK Steel also plans to contribute $297.5 million during the next several years to form a joint venture with Minn.-based Magnetation Inc. to produce iron ore concentrate, a feedstock for iron-based steelmaking raw materials. AK Steel owns 49.9 percent of the new joint venture, named Magnetation LLC, which currently produces about 400,000 metric tonnes of iron ore concentrate annually from a plant near Keewatin, Minn.

The joint venture is constructing a second plant near the existing operation with a targeted annual capacity of approximately 1 million metric tonnes and expects to expand to a rate of about 3.5 million metric tonnes annually by 2016 with a total of four concentrate plants. By 2016, it also plans to complete construction of a pelletizing plant which will then consume the majority of the joint ventureâ¿¿s iron concentrate production. The iron ore pellet production will satisfy about 50 percent of AK Steelâ¿¿s current iron ore pellet requirements, at a cost substantially below the current world market price.

⿿These investments represent significant steps in AK Steel⿿s top strategic initiative to further vertically integrate through increased ownership of steelmaking raw materials,⿝ said James Wainscott, chairman, president and CEO of AK Steel. ⿿They give AK Steel a clear plan for increasing raw material self-sufficiency, and will provide us with both a financial hedge against global market price increases and low-cost steelmaking inputs for our own consumption.⿝

Magnetation utilizes magnetic separation technology to recover iron ore from existing stockpiles of previously mined material.

AK Steel is the largest company in the region with $5.97 billion in revenue for 2010, according to Dayton Business Journal. It has 6,400 employees, including 2,400 in the greater Dayton area.

Click here for the company's full press release.

Copyright 2011 American City Business Journals

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