GFG Alliance executive chairman Sanjeev Gupta. Image: GFG Alliance. Photography: Sean Kelly.
BY ELIZABETH FABRI
IT’S been another big year for British billionaire Sanjeev Gupta and his global powerhouse GFG Alliance, with expansions in Australia, the US and Europe cementing the company as a leader in steel manufacturing and renewables. Moving into 2019, the company’s Australian division will accelerate further with an ASX listing on the cards, and plans underway to develop an electric vehicle manufacturing hub.
Three years ago GFG Alliance executive chairman Sanjeev Gupta made headlines for his rescue and revival of a number of distressed metals, mining, engineering and power generation operations in the UK.
The acquisitions came at a time when the UK had largely lost faith in its struggling steel industry in the midst of high energy prices, weak global demand and oversupply from China.
Many were of the view the UK’s steel industry was beyond repair but Mr Gupta had bigger plans.
His hallmark GREENSTEEL vision – designed to secure a competitive, low-carbon future for metal manufacture through recycling, use of renewable energy and vertical integration – not only saved thousands of jobs, it also would quadruple steel-making capacity over the next five years to 5 million tonnes per annum (mtpa) from 1.1mtpa.
The terms “steel tycoon”, “saviour of steel” and “man of steel” were all used to describe Mr Gupta’s successes, with a number of industry accolades to boot.
And while his attention was publicly directed towards the UK and US at the time, GFG’s executive chairman also had eyes on the Australian market.
“Australia had actually been on the radar for a long time,” Mr Gupta told The Australian Mining Review.
It wasn’t until the Arrium deal was on the table that GFG made its grand entrance into the country.
Arrium – which had been in the hands of administrators for about a year – had struggled to maintain a profitable business with debts of $4 billion.
In August 2017, the Group – comprising industrial and metals business Liberty, shipping infrastructure, mining, energy and commodities business SIMEC, financial services group Wyelands, and property business Jahama – announced Liberty would buy the troubled mining assets for an estimated $700 million.
Under the deal, the newly formed Liberty OneSteel would make a further $1 billion commitment to upgrade the Whyalla steelworks in South Australia; outdoing a Korean consortium that also made an offer.
The landmark acquisition mirrored the deals Mr Gupta had made in the UK with all the essential elements; a distressed seller, a tired industrial asset and room to grow.
Under the deal, GFG Alliance inherited the 1.2mtpa Whyalla steelworks and its 10mtpa iron ore mining operations in South Australia’s Middleback Ranges; Whyalla port and rail; the OneSteel steel Scrap Recycling business; 4mtpa OneSteel secondary steelworks; Australian Tube Mills; and OneSteel Reinforcing, ARC and OneSteel metal centres.
At the time, GFG Alliance was less well-known by the Australian resources and business community, however was welcomed with open arms.
Mr Gupta was again labelled a “saviour”; this time of Whyalla’s struggling steel industry, where hundreds of jobs were on the line.
“We saw the Arrium assets as a perfect fit and therefore the perfect opportunity to invest in Australia,” Mr Gupta said.
He added the months leading up to the acquisition were an “emotional rollercoaster”.
“But it’s also when I fell in love with Australia, so it was clearly worthwhile,” he said.
“It’s game changing – it launched us into the mainstream in Australia, and now leads into multi-billion-dollar, once-in-a-generation investments.”
Mr Gupta said he and his family had been based in Sydney since he acquired the Australian assets last year.
“My intention has always been to stay for two years until the business was well established, so we are planning on going back to the UK in July-August,” he said.
Spending Big
Since the acquisition, Mr Gupta’s GFG Alliance has amassed a huge portfolio in Australia comprising the Arrium assets, and the former Glencore-owned Tahmoor coking coal mine in NSW, which would de-risk an important feed for the Whyalla steelworks.
GFG had also purchased a majority stake in battery storage and solar power company ZEN Energy, which marked its entrance into the Australian renewable space and subsequent project commitments in solar and pumped hydro, as well as plans to build the world’s largest battery storage facility in Port Augusta.
In February, GFG Alliance’s SIMEC ZEN Energy committed $1.7 million towards pre-feasibility studies for its Middleback Pumped Hydro project.
Middleback would be a key plank in the Group’s plan to establish 1 Gigawatt of additional dispatchable renewable energy generation in South Australia for the Whyalla steelworks and other industrial and commercial users.
In August, SIMEC ZEN Energy announced it would build a large 280 megawatt (MW) solar plant in South Australia next year that would generate 600 gigawatt hours of power per year.
On top of its Australian investments, European acquisitions in recent months had also put the company on the map further.
In January, GFG Alliance announced it would pay $US500 million for Rio Tinto’s Aluminium Dunkerque smelter; the group’s first significant step into continental Europe.
In May, GFG’s Liberty Engineering business also picked up AR Industries (ARI); the last remaining French manufacturer of aluminium wheels.
Then the big one; GFG’s Liberty’s announcement it would buy ArcelorMittal’s major integrated steel works at Galati in Romania and Ostrava in the Czech Republic, along with rolling mills at Skopje in Macedonia and Piombino in Italy.
The deal, once approved, would double GFG’s Liberty global metal manufacturing capacity.
Over in the US, GFG had also recently restarted operations at the Georgetown steelworks in South Carolina, which had been out of action for almost three years.
Iron Warrior first blast.
Transforming Whyalla
Mr Gupta has made it no secret that his core business strategy is to own and manage as much of the supply chain as possible – adding value at each stage.
His swift and clever business decisions saw him take home the ‘21st Century Icon’ prize at the ELITE London Stock Exchange Group awards in London during September.
“This is a great honour for all of us in the worldwide GFG family and I’m thrilled for us to be recognised in a program that specifically sets out to inspire future generations,” he said.
Mr Gupta said his central focus in the coming years was to transform the Whyalla operations, which would see an investment of more than $2 billion.
“This transformation will include increasing the production of our primary steel operations to 2 million tonnes and beyond; increasing our product capability by introducing new products; establishing an overseas customer base for export steel products; increasing our iron ore reserves; and further unlocking our large-scale magnetite potential,” he said.
“It also involves exploring opportunities to develop the Whyalla Port into a world-scale, multi-user facility; establishing ~1GW of renewable energy generation and storage; all while exploring other opportunities such as copper, banking and electric vehicles.”
In Australia, GFG’s mining and port operations were operated under GFG’s SIMEC Mining and SIMEC Infrastructure business, while the steelworks and OneSteel assets were operated under the umbrella of Liberty OneSteel.
SIMEC Mining’s projects included the Iron Baron, Iron Knob and South Middleback Ranges mines, which produced hematite and magnetite iron ore that was respectively railed and piped to Whyalla.
This year, SIMEC also received approval for two mining leases to develop the Iron Sultan mine, which would provide 600,000 tonnes of ‘cheap’ iron ore to the steelworks, and the Iron Warrior mine, capable of exporting up to 1.5mtpa.
“Warrior is already in production, while the Sultan timing will be dependent upon upcoming decisions relating to the Whyalla Steelworks Transformation Project,” Mr Gupta said.
SIMEC was also completing due diligence into the commercial potential of Havilah Resources’ Grants and Maldorky projects in South Australia, which were conveniently positioned near GFG’s Whyalla operations.
Mr Gupta said “It’s still too early to speculate” on the outcome of the due diligence, however earlier this year Havilah Resources’ chief executive Walter Richards said SIMEC could potentially be “the perfect partner” for its iron ore assets.
The next phase of Sanjeev’s Whyalla expansion was a listing on the Australian Securities Exchange (ASX).
GFG Alliances’ initial plan was to list on the New York Stock Exchange, but given recent movements in South Australia, it had a change of plans.
“We’re currently planning to list Liberty Steel Australia on the ASX for now, with a target of either May or November next year,” Mr Gupta said.
It is understood GFG will consider listing all divisions, with no plans for an entire group listing.
Going Electric
In parallel, Mr Gupta was also in the planning stages of establishing an electric vehicle manufacturing hub in Australia.
In February, rumours circled that the group had approached General Motors to buy assets from the closed former Holden factory; a proposal that was reportedly rejected by the car giant.
Mr Gupta said the company still remained “100 per cent committed to electric vehicles in Australia.”
“As far as a location, we are still open to options,” he said.
It is understood the hub would be built within the next two to three years, and would manufacture a modern lightweight electric ‘people’s car’, inspired by Formula One racing, which would cost much less than the Tesla S model.
The operations would be small-scale producing about 30,000 units annually, which would be potentially sold for about $20,000 to $30,000.
In light of GFG’s vertical integration model, Mr Gupta said the group was open to diversification into other minerals that were key ingredients in the electric vehicle manufacturing process.
“We are currently working on and investigating copper opportunities, including the possibility of a copper smelter at our Whyalla operations,” he said.
Mr Gupta said the business was also open to other acquisitions and opportunities across its divisions.
“Australia is a key focus for this type of activity, both organically and inorganically,” he said.
