OneSteel's transition to become a significant iron ore exporter faces its moment of truth when shareholders in ASX listed minnow WPG Resources vote on a sale of assets to the troubled steel maker.

OneSteel has offered to spend AUD 346 million buying South Australian iron ore assets from subsidiaries of WPG Resources, as part of a strategy to diversify beyond the struggling steel sector.

Iron ore is a key ingredient in steel making, but with prices still close to record highs, OneSteel has been tempted to sell the product to foreign buyers rather than risk losing money by turning it into steel.

OneSteel and its major rival BlueScope have suffered significant losses this year as the high Australian dollar and competition from overseas put a massive hole in earnings. Both companies were forced to axe jobs, but OneSteel was partially insulated from the pain because it owns iron ore assets.

The swoop on the WPG assets is seen as a significant shift of focus for OneSteel, with the purchase set to almost double the company's export rate to nearly 10 million tonnes a year, making it a bigger exporter than many iron ore pure plays on the ASX.

Directors of WPG Resources have recommended their shareholders accept the offer.

(Sourced from www.theage.com.au)