In October of 2011, AK Steel formed Magnetation LLC, a joint venture with Magnetation, Inc., a private Minnesota company. Magnetation LLC produces iron ore concentrate from legacy reserves in Minnesota and intends to construct and operate a pelletizing plant to produce iron ore pellets to be consumed by AK Steel. The joint venture utilizes magnetic separation technology to recover iron ore from existing stockpiles of previously mined material, often referred to as “tailings.” Utilizing these iron ore tailings eliminates the need for traditional drilling, blasting and excavating, and can result in the creation of new wetlands in an environmentally responsible method.
The joint venture plans to build additional iron ore concentrate plants and a pelletizing plant by the year 2014. AK Steel’s share of the net income from the joint venture’s sales of iron ore concentrate to third parties will serve as a partial financial hedge for AK Steel against increases in the price of iron ore. When the pelletizing plant is in operation, the company intends to procure approximately 50 percent of its current annual requirements – or more than 3 million tons – of low-cost, high-quality iron ore pellets directly from Magnetation LLC.
Iron ore is a critical raw material necessary for steelmaking. When combined with metallurgical coke and limestone in a blast furnace, molten iron is produced – the first step in the steelmaking process. AK Steel operates blast furnaces at its steel plants in Middletown, Ohio and Ashland, Kentucky.
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