Steelmaker OneSteel has moved to shore up its position in the booming iron ore industry by spending $346 million on several mines.
However, Australia's second-biggest steelmaker denied it would exit steelmaking despite a record high Australian dollar and raw material costs causing a crisis in the industry, making it impossible to compete with other countries such as China.
The announcement came on the same day Australia's biggest steelmaker BlueScope announced the end of its export business with 1,000 job cuts and the closure of a blast furnace, following a $1.05 billion full-year loss.
OneSteel reported that full-year profit was down 10.9 per cent to $230.3 million, with iron ore earnings increasing by 57 per cent to $524 million but the steel-making arm posted a $185 million loss.
OneSteel on Monday also said it would spend the $346 million on iron ore assets in South Australia including Peculiar Knob, which it was purchasing from WPG Resources.
It will also spend $200 million expanding its export port at Whyalla in South Australia to 12 million tonnes per annum from current annual capacity of between 6.5 million and seven million tonnes.
The expansion work is expected to be completed by the fourth quarter of calendar 2012.
The company's strategy was to expand its mining activities, chief executive Geoff Plummer told reporters on Monday.
Mr Plummer said the purchase of the Peculiar Knob project from WPG, and the strong iron ore market, gave him the confidence to make a significant investment in the port at Whyalla.
The purchase would add to earnings per share once iron ore sales started in the fourth quarter of 2012.
WPG Resources recently received SA government approval to develop the project in the Woomera Prohibited Area.
"This is certainly consistent with our stated strategy, which is to invest and grow iron ore and mining consumables where we can take advantage of the far more positive outlook in the resources space," Mr Plummer said.
The investment in the Whyalla port would directly and indirectly create 1,000 jobs, he said.
However, this was offset by the lack of a guarantee that the company's inefficient, loss-making steelworks in the town would stay open.
"If we believed that we couldn't make the steel manufacturing viable, then the sorts of things that we're talking about (shutting down steel manufacturing) would have to be contemplated," Mr Plummer said.
"We believe it is in the best interests of our shareholders to address the competitive positions of our steel manufacturing to ensure that those businesses can generate cash rather than consume a lot of cash in closing them down."
SA Premier Mike Rann said the investment by OneSteel ensured the long-term viability of Whyalla and was a further boost to the state's growing mining sector.
OneSteel announced last week that it had cut its manufacturing and distribution workforce by 400 people, while flagging more job cuts.
OneSteel's shares fell one cent, or 0.75 per cent, to close at $1.33 on Monday.