Gerdau explores iron ore options as prices rise

Brazilian steelmaker Gerdau (NYSE: GGB) will try to offset soaring costs for raw materials by developing three small mines, the company's vice-president of finance told reporters. Porto Alegre-based Gerdau, the largest maker of long steel in the Americas, purchased three small mines from Votorantim's Barra Mansa steel company, Osvaldo Schirmer told reporters during a conference call to discuss 4Q04 and 2004 results. Gerdau closed the deal to buy the Gongo Soco, Varzea do Lopes and Miguel Burnier mines, all in Minas Gerais state, in late 2003. The mines contain some 400Mt of iron ore and Miguel Burnier is likely to be the first one to be developed, Schirmer said. "In 2006 we will have a decision about starting exploration on one of these resources," he added. By the end of 2006 Gerdau could supply 25% of its iron ore needs, estimated vice-president Frederico Gerdau Johannpeter. Long term, the company could supply 50-60% of its needs, he said. Gerdau uses about 4.5Mt of iron ore a year in its steel operations.