Cotec investment signs deal to acquire pellet plant

Executive Summary

• Cotec Holdings Corp. (owning 16.5% of MagIron LLC) reports that MagIron has entered into a binding asset purchase agreement to acquire the Reynolds Pellet Plant from Altos Hornos De Mexico SAB de CV (ASHMSA).
• The acquisition is expected to close before December 31, 2025, and represents a significant milestone in MagIron’s strategy to establish the U.S.'s first integrated merchant pig iron operation and direct-reduction-grade pellet producer.
• The acquisition completes MagIron’s vertically integrated portfolio, including an iron ore concentrator, rail loadout facility, and the new pelletizer, originally built at a total cost of approximately $660 million.

Key Details

• Transaction Structure: Binding Asset Purchase Agreement (APA) between MagIron LLC and Altos Hornos De Mexico SAB de CV (ASHMSA).
• Target Asset: Reynolds Pellet Plant located near Reynolds, Indiana.
• Asset Specifications:
  • Modern straight-grate, past-producing, restart-ready pelletizer.
  • Benefiting from approximately $440 million of prior investment.
  • Previous annualized run rate: ~2.2 million tonnes per annum (tpa) of pellets.
  • Designed capacity: Expandable to 3.0 million tpa with limited additional capital.
  • Previously integrated with MagIron’s Minnesota iron ore concentrating facility; placed in care and maintenance in 2016.
• Strategic Integration:
  • Post-acquisition, MagIron owns 100% of a vertically integrated portfolio: iron ore concentrator, rail loadout facility, and pelletizer.
  • Total original construction cost of these integrated facilities: ~$660 million.
  • Goal: Establish the U.S.'s first vertically integrated merchant pig iron producer.
• Future Development:
  • MagIron is working with Primetals Technologies to assess feasibility for downstream expansion to produce granulated pig iron.
  • Targeting a domestic supply chain to reduce U.S. dependence on foreign imports (specifically from Brazil) and improve quality (lower impurities).
  • Strategic focus on automotive, aerospace, and defense industries.
• Due Diligence:
  • Extensive technical, commercial, legal, and environmental reviews by third-party consultants.
  • Review of historical production/cost data from 2016 validated key assumptions for capex, operating costs, production volumes, and restart schedule.
• Funding:
  • Acquisition and restart funded at the MagIron level.
  • No funding required from Cotec Holdings Corp.
• Ownership Context: Cotec Holdings Corp. owns 16.5% of MagIron on a fully diluted basis.

Notable Quotes

• Larry Lehtinen, CEO of MagIron: "Acquiring the Reynolds pellet plant is a transformative step for MagIron. Together with our successful test work at the NRRI, we are well advanced in establishing an entirely domestic supply chain of high-quality, low-carbon ore-based metallics for American steel production... strengthening supply security, improving quality, reducing exposure to increasingly unreliable foreign markets and supporting the transition to cleaner, low-carbon steelmaking."
• Julian Treger, CEO of Cotec: "This is a significant step forward for MagIron. Once the acquisition is completed, all the necessary buildings block will be in place for MagIron to execute on its strategy of becoming a fully integrated multidecade DR pellet producer to America's fast-growing electric arc furnace steel industry... We believe that the successive value-accretive asset acquisitions... serves as another marker of the value created by the Cotec team and our belief that there remains a significant gap between the intrinsic value of our assets and our current share price."