Rating agency Standard & Poor's has announced that its long term corporate credit and debt ratings on Korea based steelmaker POSCO are not affected by the company's acquisition of a stake in the Roy Hill Holdings Pty Limited iron ore project in Australia.

On January 17th 2012, POSCO announced it would acquire an 11.25% stake worth about AUD 1.5 billion in Roy Hill's iron ore project in Western Australia.

S&P said that "We expect the company to pay roughly more than half of its planned investment amount in 2012 and the rest in 2013 and 2014. In our view, the acquisition could further pressure POSCO's financial risk profile, which is already weak for the current rating. Still, we believe the acquisition is a core investment and can enhance POSCO's medium term cost position because the company expects the Roy Hill project to begin producing iron ore, the key raw material for steelmakers such as POSCO, as early as 2014."

The rating agency said that "In our view, the rating on POSCO depends more on the company's commitment to curb and divest non core investments and make operational improvements to reduce debt over the next 12 months than on this specific investment. We think the company's ability to execute its strategy remains uncertain since both the steel industry and POSCO's ability to sell its non core investments are vulnerable to global macroeconomic cycles."