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POSCO Receives First Dividend from Roy Hill Iron Ore Project

2020/10/06

l On September 24, Roy Hill Holdings decided to pay 400 billion KRW in dividends, out of which 50 billion KRW is paid to POSCO
l Roy Hill, Australia’s largest single iron ore mine, has grown into the world’s fifth largest exporting project in 10 years
l POSCO started investment in 2010 to secure stabilized supply of iron ore, retaining a right to purchase 26% of the yearly consumption

POSCO (CEO Jeong-Woo Choi) is to receive 50 billion KRW worth of dividends from Roy Hill Holdings.

On September 24, the board of Roy Hill Holdings decided to pay out dividends based on the company’s improved financial soundness and solid profits. This is the first dividend payment by Roy Hill Holdings since its founding. The total dividends reach 475 million AUD (around 403.6 billion KRW), and since POSCO holds 12.5 percent of the total share, the company will receive 50 billion KRW accordingly within next month.

Roy Hill Holdings was established to develop the Roy Hill iron ore mine, located in Pilbara, Western Australia. The major shareholder is Hancock (70%), and POSCO (12.5%), Marubeni Corp. (15%), and China Steel (2.5%) formed a consortium to jointly develop the field.

The Roy Hill mine is Australia’s largest single mine, with an iron ore reserve of 2.3 billion tons. Iron ore exported by Roy Hill Holdings amounts to 55 million tons per year, positioning itself as the fifth largest exporter in the world.

In 2010, POSCO signed an agreement with Roy Hill Holdings to participate in the Roy Hill project. The price of iron ore was unstable at the time due to limited supply and POSCO decided to invest in raw materials to reliably secure high-quality iron ores. As the price of iron ore plummeted from between 130 USD and 140 USD per ton to 56 USD per ton in 2015, concerns were raised regarding the investment. However, POSCO prioritized in stabilizing the business and focused on developing the mine and streamlining operations.

In 2016, two years since the start of mining operations, POSCO acquired 6 million tons of iron ore, and currently, the company has been securing a stable supply of 15 million tons of iron ore, which amounts to 26% of the annual consumption.

This year marks the 10th anniversary of POSCO’s investment in the Roy Hill iron ore mine project. Amid the difficult situation posed by the COVID-19, the large-scale dividend by Roy Hill Holdings shows that the project is right on track.

Roy Hill Holdings’ financial performance has improved rapidly since its commercial production in 2017, with operating profit reaching 3.2 billion AUD as of June this year. Accordingly, POSCO’s equity method profit also increased from 12 billion KRW in 2016 to 150 billion KRW in 2019. In August, Roy Hill Holdings paid off its debt amounting to 6.2 billion USD of which it had borrowed for the initial development of the mine. As the repayment deadline, which was previously scheduled for September 2024, was advanced by four years, the company’s financial soundness has improved significantly, and dividend payments are expected to continue in the future as well.

Starting with an equity investment in Mt. Thorley mine, Australia, in 1981, POSCO currently participates in 23 raw materials projects around the world.

▲ Iron ore laid out in Roy Hill mine, Pilbara, Australia

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