MT Arcelor Mittal New

Steel giant, ArcelorMittal (MT) is set to expand its mining operations in Quebec with an investment of C$2.1 billion ($2.2 billion). The expansion will likely create 8000 jobs during construction and more than 900 permanent jobs once completed.

The investment will allow ArcelorMittal Mines Canada to increase its annual production of iron ore concentrate from 14 million tonnes to 24 million tonnes by 2013.

The plan involves expansion of ArcelorMittal's Mont-Wright mining complex and additional construction at Port-Cartier, and is subject to environmental and other regulatory approvals.

Last month, ArcelorMittal reported diluted net earnings of 69 cents per share in the first quarter of 2011, surpassing the Zacks Consensus Estimate of 47 cents as well as last year’s 42 cents per share.

Total steel shipments in the first quarter of 2011 were 22.0 million metric tonnes compared with 21.0 million metric tons in the year-ago quarter.

Quarterly revenues increased 27.3% year over year to $22.2 billion from $17.4 billion in the year-ago quarter and increased 7.2% sequentially. Sales were higher over the previous quarter primarily due to higher shipment volumes (+4%). However, the results were slightly below the Zacks Consensus Estimate of $22.8 billion.

For the second quarter of 2011, management expects EBITDA to be approximately $3.0 - $3.5 billion. Steel shipment volumes, average steel selling prices and EBITDA/ton are expected to increase sequentially, while capacity utilization levels are expected to improve to approximately 80%.

Additionally, operating costs are expected to increase sequentially due to higher raw material prices. The company also expects mining production and profitability to improve sequentially in the second quarter.

The company expects working capital requirements to be in line with the increased activity levels and prices resulting in further increase in net debt in the second quarter. The company expects its full-year 2011 capital expenditure to reach $5 billion, of which $1.4 billion is estimated to be spent on mining.

Major competitors of ArcelorMittalare are United States Steel Corp. (X) and Tata Steel Limited.

We maintain our Outperform recommendation on ArcelorMittal with a Zacks #2 Rank (Buy) on the stock.

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