Corus Deal Leaves Russian Out in Cold

Corus, the Anglo-Dutch steel group, brushed aside an approach yesterday from Russian entrepreneur Alisher Usmanov, its second biggest shareholder, and secured a 10-year deal with a Brazilian miner to supply iron ore.

The contract with CVRD, worth up to £200m a year at today's prices, comes just 24 hours after Mr Usmanov signalled his desire to build up his 10% stake in Corus and sell it iron ore, semi-finished steel and natural gas.

The long-term Brazilian contract to supply 10m of the 25m tonnes of ore Corus consumes each year, at a cost of up to £500m, is part of chief executive Philippe Varin's drive to contain costs.

The new contract replaces an existing one with CVRD to supply just 5m tonnes over three years and complements deals with Australian producers, Rio Tinto and BHP-Billiton.

The market for iron ore has become tight with the huge growth in demand in China - a region effectively barred to the Anglo-Dutch group as it cannot afford an expensive overseas expansion.

Mr Varin said in Brazil: "This deal will enhance Corus's security of supply of high quality iron ore for the long term."

Corus abandoned a £2.9bn merger with Brazilian steel producer CSN - designed to give it access to plentiful cheap iron ore - in late 2002 and is viewed as an eventual takeover target for bigger European and other players.

Mr Usmanov said at the weekend that, by increasing his stake, he could seek a seat on the Corus board - an unappealing prospect for the directors of the Anglo-Dutch steel group.

The Russian, who owns a mine in the Urals, would also like to take a substantial stake in or control of Corus's Tees-side plant which makes steel slabs and could be sold off along with the Dutch-based aluminium business and a US plant.

Corus, meanwhile, has sold off 600 acres of its Llanwern site in Newport, south Wales, to property group St Modwen for regeneration as a housing, commercial and leisure centre.

St Modwen, which yesterday reported a 17% rise in annual pre-tax earnings to £35m and paid MG Rover £42.5m to buy 228 acres at the Longbridge car plant, said it would invest £200m at Llanwern.

The plant, semi-closed some three years ago, now employs 1,700 in rolling and coating operations.

Corus is retaining a further 900 acres of farmland and reservoirs; it is poised to sell 189 acres at the former Ebbw Vale tinplate works and has sold land at the former Bryngwyn coating works near Gorseinon to Persimmon Homes which will use the site for housing and economic development.