OneSteel Ltd. (OST), Australia’s second- biggest steelmaker, gained for a second day in Sydney trading after saying it is switching focus to iron ore from its unprofitable steel unit.
The shares climbed 16 percent to close at 95 Australian cents, adding to their 12 percent gain yesterday.
OneSteel is considering changing its name as it plans to almost double iron ore production in two years. The company yesterday reported underlying earnings of A$78 million ($83 million), beating its own guidance of as much as A$75 million.
‘We saw an uplift yesterday and we’re seeing a significant follow through here today,” Jamie Spiteri, head dealer at Shaw Stockbroking Ltd. in Sydney, said by phone. “The group highlighted the fact that its steel industry is no longer the prominent component of its earnings base and it’s got the capacity for further expansion in years to come.”
Mining will account for more than half its assets when iron ore production reaches 11 million metric tons a year at full capacity after June 2013, OneSteel Chief Executive Geoff Plummer said yesterday. It plans to produce 6 million tons of iron ore this fiscal year.
“We see value in the iron ore business and mining consumables business, which are both key drivers of earnings while Australian steel remains weak,” UBS AG analysts Andrew Moller, Glyn Lawcock and Daniel Morgan said in a report published today. The analysts had a “buy” rating on the stock and a 12-month price target of between A$1.50 and A$1.61.