Mining

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Our Business

How and where we run our steel and mining business.

Our progress

This year saw important progress across our business, where we continued to meet the needs of all our stakeholders.

Action 2020

Action 2020 is ArcelorMittal's commitment to structurally improving profitability and cash flow generation.

Governance

Good corporate governance is about compliance, continuous stakeholder dialogue and being a good corporate citizen.

Fact book

Details of our steel and mining operations, financials, production facilities and shareholder information.

While the market remains volatile, our consistent and relentless focus on reducing costs gave us a solid platform to take advantage of the improvement in iron ore prices during 2016. We also mapped our strategy to develop the supply chain assurance standards that will drive progress in our industry and differentiate our business.

Simon Wandke CEO, ArcelorMittal Mining

Sales

3.1

(US$ billion)

Ebitda

762

(US$ million)

Iron ore production

55.2

(million tonnes)

Coal production

6.3

(million tonnes)

Lost time injury frequency rate

1.07

(incidents per million hours worked)

Ebitda contribution to Action 2020

120

(US$ million)

Our 2016 operating environment

Volatility in global commodities has become the norm, and 2016 witnessed continuing fluctuation as prices and production responded to macroeconomic trends. Iron ore prices rose during the year, supported by economic stimulus measures in China and higher than expected Chinese steel demand. Coking coal prices rose rapidly towards the end of 2016, largely due to China unilaterally limiting coal production.

Stakeholder scrutiny of environmental standards and supply chain assurance continued to grow: The Initiative for Responsible Mining Assurance (IRMA) plans to pilot its standard in 2017.

Safety is our highest priority

It is deeply concerning to report that six colleagues lost their lives in 2016, four of which were in a single accident in Kazakhstan. Our LTIFR also deteriorated to 1.07, from 0.74 in 2015.

Our mining segment has materially improved its health and safety performance in recent years, and delivered continuous improvement over a six-year period up to 2014. However, we have seen a deterioration in performance over the past two years. We are targeting significant improvement in 2017; we know we have the right processes in place and the key now is to focus on improving the safety culture.

Specifically, we must continue addressing serious occurrences by raising risk awareness, delivering experiential training and markedly improving the quality of interactions for hazard identification and risk analysis, shop floor audits and pre-shift meetings.

See Outcome 1 for our global approach to safety.

LTIFR

incidents per million hours worked

Color	#8B819E
X-axis	LTIFR
2014	0.57
2015	0.74
2016	1.07
LTIFR

Severity rate

number of days lost to injury per thousand hours worked

Color	#AA9E6E
X-axis	Severity rate
2014	0.06
2015	0.10
2016	0.12
Severity rate

Andrade mine in Brazil celebrates 24 years without a lost-time injury

Committed employees who share high awareness of risks and deeply care for themselves and their colleagues are key to safe mining. Our iron ore mine in Andrade, Brazil, attributes its proud record on safety – there has been no fatality at the mine for 67 years – to good leadership, teamwork, and a willingness to keep refreshing and renewing a commitment to safe behaviour. It celebrated an outstanding 24 years without lost-time injury on 11 September.

We know we have the right processes in place and the key now is to focus on improving the safety culture in all our assets.

Princeton wins IMCC H&S award

Our mine in Princeton won the IMMC’s inaugural award for its SMART initiative (Safe Miners Acting Responsibly Together), an interactive, comprehensive training programme that underpins all safety programmes at the mine. SMART has played a big part in Princeton’s achievement of more than six years without a lost-time injury, logging more than 1.3 million working hours during this time.

As iron ore prices moved towards more sustainable levels in 2016, albeit from a low base, the work we have implemented through Action 2020 to make structural cost improvements and improve our reliability, enabled us to make a significant contribution to ArcelorMittal as a whole. That's not just in terms of profitability – as an internal supplier of raw materials, our work on supply chain assurance is strengthening the offer of our steel business to customers who are increasingly interested in where their products come from.

Simon Wandke CEO, ArcelorMittal Mining

Our performance

Ebitda

762

(US$ million)

Underpinning our bid to make our business more competitive through Action 2020 is a focus on improving our underlying performance regardless of market conditions. Following on from the 20% reduction in iron ore unit cash costs achieved in 2015, in 2016 we achieved a further reduction of 10% through a series of structural improvements. This, along with a 4.8% increase in average iron ore prices, contributed to a 65% increase in Ebitda to US$762 million.

Our own iron ore production decreased by 12.1 to 55.2 million tonnes, as a result of lower production in Liberia (as we work towards transitioning to a nearby, higher grade deposit), Mexico (where we suspended production at a mine in late 2015 for commercial reasons) and Ukraine (reflecting a revised mine plan following a delay in accessing new tailing disposal land). Higher production at our Princeton mine in particular contributed to an increase in own coking coal production of 1.8% to 6.3 million tonnes.

Sales were down 8.1% to US$3.1 billion. A decline in the first half of 2016 was partially offset by an increase of 2.4% in the second half. Sales to our external customers were down 5.2% at US$781 million, mainly due to lower shipments from Mexico.

Read the full review of Mining’s operation results.

Developing trusted sustainability standards

To ensure that our mining business is truly creating value, we need to look at what is happening now – including our focus on structural improvements and costs – while also looking ahead at the needs of our business and our stakeholders, including customers.

In 2016, we launched our Mining Sustainable Development (SD) policy, which sets out the principles that define our approach to mining. It is designed to help us build on our focus on land and local relationships, and to reinforce our commitment to being a long-term presence in the areas we work – and one that leaves a sustainable legacy.

With the policy in place and aligned with our SD outcomes, we are now identifying how and where we can improve our performance, led by 'outcome champions' within senior management.

The launch of our policy comes at a time when we are also playing a leading role in the wider movement towards establishing social and environmental standards for mining that stakeholders, including customers, recognise and value. In our role on the steering board of IRMA (Initiative for Responsible Mining Assurance), we have helped in the work of preparing best practice standards that will create an independently verified responsible mining assurance system that improves social and environmental performance. In 2016, IRMA was field-testing its standards; pilots are set to begin in 2017. We expect this to be a major development for our industry, and it is one we want to lead.

Managing risks in our tailings dams

Investment in tailings management projects

28.1

(US$ million)

Mining businesses have always understood the importance of managing tailings dams, but the tragic failure of the Samarco Fundão dam in November 2015 and its resulting human and environmental cost has brought the issue into sharp focus.

Our tailings storage facilities (TSF) Surveillance Guidance was implemented across our business in mid-2015, and is supported by a programme of comprehensive third-party dam safety reviews. Any new tailings facilities we build are also subject to third-party reviews.

We're also exploring new approaches to reduce the risk and impact of tailings. Drones and digital data collection both offer ways to monitor tailings and give us more real-time information. At our mine in Serra Azul in Brazil, we've introduced dry stacking technology, a process that removes most of the water from tailings so that they can be stored in a more structurally stable form. In 2016, our dry stacking pilot scheme was recognised by the Federation of Minas Gerais Industries FIEMG in Brazil.

New water assessment tool driving improvement

Mining is water intensive, and knowing how and where water is used in our operations is a key step to managing our water use in ways that reduce impacts on the environment and our neighbours. In 2016, we launched our new Water Assessment for Improvement tool, developed by our R&D teams. The tool maps water flows to produce 'process flow sheets' which record flow and quality data for each stream. This information helps us understand what we need to do to improve, and to follow up on our progress when improvements are made.

Investing in water management in Canada

Ensuring that waste water is diverted away from vulnerable ecosystems is vital to our water management. In 2016, we invested in new intercepting ditches to divert run-off from waste storage at our mines in Mont Wright and Fire Lake. By directing the water to treatment facilities, the ditches prevent pollutants from reaching streams and lakes, in particular Webb Lake.

Pilot pellet project designed to cut emissions

Increasing our use of alternative fuels is a valuable way to reduce our emissions of greenhouse and other gases. In May 2016, we were awarded a CAN$4.5 million grant from the Québec government to help enable our pellet plant in Port Cartier to use a greater proportion of alternative fuels by replacing six oil-fuel burners with natural gas burners. The pilot project aims to reduce greenhouse gas emissions by more than 30% compared with oil-based fuel, while also significantly reducing emissions of sulphur and other pollutants.

Recognising stakeholder concerns in Liberia

In a volatile commodities market in which prices for iron ore in particular have fluctuated considerably, meeting stakeholder expectations can be challenging.

Our Liberia operations have a strong overall record: we have worked hard to make sure we develop a sustainable and resilient rural landscape through our biodiversity conservation programme, and are proud of our role in building the management plan for the East Nimba Nature Reserve, a biodiversity hotspot near our operations.

We have taken a number of steps to improve our dialogue with stakeholders in Liberia. A new collective bargaining agreement with unions at our mine was under discussion in 2016, and finalised in February 2017.

Our mining business has a robust pipeline of Action 2020 projects which are continually assessed and progressed toward potential investment and implementation. The focus is on projects which improve the competitive positioning of our business, and specifically projects which return their investment cost in a short timeframe.