The money is earmarked entirely to go towards reducing the company's debt, but it's not enough to have a significant impact. By the time the financial year had reached an end on June 30 this year, Arrium's debt had leapt 24% to $2.143 billion, while gross profit dropped 19%. For an investor, when a company's debt is twice the size of its market capitalisation, it is rational to ask yourself "can it last?".

The sale of Steel and Tube was another step towards Arrium's strategy of shifting away from the underperforming steel production side of the business, which has been hit by low demand and the high Aussie dollar, as well as shifting focus towards joining the big players in the resource export business like BHP Billiton (ASX: BHP) and Rio Tinto (ASX: RIO). Arrium expects to almost double the level of iron ore sales over the coming year. However, with the World Steel Association revising its forecasts for steel demand down by 2% in 2013 according to Reuters, it would seem dangerous to pin all hopes on China's continued demand.

Foolish takeaway

Staying afloat in the mining game is a lot about efficiency of production and having the cashflows to get through potential dips in ore prices and demand. If Arrium wants to outlast its big crucible of debt and look towards growth and stability, this is something it will have to quickly master.

If you are looking for more ASX investing ideas, look no further than our brand-new free report: "The Motley Fool's Top Stock for 2012-13". In this report, Investment Analyst Scott Phillips names his top pick for 2012-13 and beyond. Click here now to find out the name of this small but growing software company with huge potential.

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Motley Fool writer Regan Pearson does not own shares in any of the companies mentioned in this article. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Can Arrium last? appeared first on The Motley Fool Australia.

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