Reuters reported that Brazilian steelmaker Gerdau has an extensive list of potential partners for a plan to spin off a mining unit that has about 2.9 billion tonnes of iron ore reserves.

Mr André Gerdau Johannpeter CEO of Gerdau said that it is seeking the spin off to reach iron ore self sufficiency and broaden its sources of revenue.

The spin off, which aims at helping Gerdau either raise more money to develop the asset or bring in a partner with greater expertise in handling ore mines, comes as prices for the mineral are expected to free fall in coming years after having reached record early in 2011.

He added that "We foresee that, in the long term, this is a good area of business and we want to be in there."

The steelmaker, which uses scrap and iron ore as ingredients for steel, needs more stable supply of iron ore to tame costs and reduce reliance on third party purchases. Plans by rival CSN to do the same with its Casa de Pedra mine have faced problems related to market turmoil and disputes inside another mining division Namisa.

Gerdau's net income plummeted 34% to BRL 472 million in the last quarter of 2011 from BRL 720 million in the third quarter. YoY, however, it climbed a stronger than expected 12%, beating the average profit forecast of BRL 326 million.

The quarter on quarter drop may be an indication that earnings in the sector are likely to disappoint as high raw materials prices, which affected earnings for mills throughout 2011, keep hampering profitability.

(Sourced from www.reuters.com)