ArcelorMittal, the world's biggest steelmaker, will sell a $1.1 billion stake in a Canadian iron ore mine operator to a consortium that includes South Korean steelmaker POSCO and Taiwan-listed China Steel Corp, China Steel said in a statement.
ArcelorMittal, formed in 2006 when India-born Lakshmi Mittal's steel business bought European peer Arcelor for $33 billion, is battling sluggish steel demand and is looking to offload assets to cut debt.
The sale of a 15 percent stake in Canada's Labrador Trough iron ore mining and infrastructure asset is part of that process.
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POSCO, China Steel and ArcelorMittal Mines Canada will own Labrador Trough through a joint venture and will enter into long-term iron ore supply agreements, China Steel said in the statement on its Website.
POSCO shares were up 2.6 percent, while China Steel rose 0.6 percent.
The transaction is subject to approval from the Taiwanese government, and is expected to close in two installments in the first and second quarters of 2013, the statement said.
The deal will give POSCO, the world's fourth-biggest steelmaker, access to iron ore and coal used to make steel, as it currently imports nearly all of its key raw materials. POSCO already owns a 12.5 percent stake in Australia's $10 billion Roy Hill project.
Earlier on Wednesday, a South Korean wire service Yonhap Infomax reported China Steel and POSCO would jointly contribute $540 million, while the remainder was expected to be paid by financial investors including the National Pension Service.
A POSCO spokeswoman confirmed a consortium involving POSCO signed a stock purchase agreement to acquire a stake in the iron ore mine operator, but declined to elaborate on details.
ArcelorMittal is one of Canada's top exporters of iron ore to steel markets around the world and its operations account for about 40 percent of Canada's iron ore output. It operates two large open-pit mines in the province of Quebec, where it also owns the Port-Cartier industrial complex that includes a pellet plant, storage areas and port facilities for shipping.
Last month, ArcelorMittal wrote down the value of its European business by $4.3 billion, underscoring gloom about prospects for the region's recession-hit manufacturers.
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A source had previously told Reuters that POSCO was seeking to buy the stake with South Korea's National Pension Service and other investors.
Credit agency Fitch has cut ArcelorMittal's long-term issuer default rating to BB , just below investment grade, due to the challenging outlook for Western European steel markets in 2013.
ArcelorMittal, which makes about 6-7 percent of the world's steel, says demand in Europe had fallen 29 percent since 2007 when the financial crisis started.