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Deep spending cuts in Europe accompanied by sluggishness in European auto manufacturing and construction industry have driven down demand for steel, negatively impacting steel majors like ArcelorMittal.

The sustained economic crisis in Europe has pushed ArcelorMittal, the world's biggest steelmaker, deeper into debt prompting the steel major to hive off 15 percent of its stake in ArcelorMittal Mines Canada to a consortium including South Korean steelmaker POSCO and Taiwan-listed China Steel. The stake sale is subject to regulatory approvals and is expected to close in two installments in the first and second quarters of 2013.

ArcelorMittal will sell 15 percent of its stake in the Canadian iron ore unit for a total consideration of $1.1 billion, which be reportedly used to pare down its debt. The group's net debt rose by $1.2 billion during the third quarter to $23.2 billion at the end of September.

"We are committed to growing ArcelorMittal's mining business," Peter Kukielski, Chief Executive, Mining at ArcelorMittal and a member of the group management board, said in a company release. "This joint venture incorporating a long-term off-take agreement is consistent with our strategy to forge strategic relationships with key customers as we build our global mining business. The consortium will be an excellent partner as we pursue further expansion at AMMC."

The deal will give POSCO, the world's fourth-biggest steelmaker, increased access to iron ore. ArcelorMittal Mines Canada operates two large open-pit mines in the province of Quebec, where it also owns the Port-Cartier industrial complex that includes a pellet plant, storage areas and port facilities for shipping.

ArcelorMittal under the deal POSCO, China Steel and ArcelorMittal Mines Canada will enter into long-term iron ore supply agreements.

Reports say China Steel and POSCO will jointly contribute $540 million to finance the deal, while the remainder is expected to be paid by financial investors including South Korea's National Pension Service.

Goldman Sachs and RBC Capital Markets were advising ArcelorMittal on the deal, while Morgan Stanley will advise the POSCO consortium.