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Posts Tagged ‘Brasil’

Zamin weighs up London flotation

July 26, 2010 Comments off

“Zamin, a Brazilian iron ore company, is considering a London flotation.

The company’s decision to look at a London listing comes just weeks after Ferrous Resources, another developer of Brazilian iron ore mines, cancelled its planned London offering, citing volatile markets and a mixed outlook for the raw material that makes steel. …”

Zamin expects its principal mine in Bahia state – called Bahia Mineracao, or Bamin – to cost $1.8bn to build. The project is half-owned by Eurasian Natural Resources Corp, the London-listed Kazakh miner.

Source: Financial Times, July 26, 2010

Observations:

  • Zamin needs to raise equity in order to develop its Bamin deposit, a 41% 2.4bln ton deposit which is located close to the areas most important railroad.
  • Apart from the flagship Bamin deposit, Zamin owns the rights to deposits in Urandi (Brasil) and Valentines (Uruguay).

Implications:

  • Iron ore price volatility will cause potential of cash amounts raised in the IPO to be rather low. However, no other resources companies will be interested in buying a stake as they will not be able to gain control as long as ENRC holds 50% of the project.
  • Zamin will try to benefit from the higher iron ore price caused by the new pricing mechanism and will try to leverage the expertise of its management team in managing iron ore projects in Brasil in gaining investor’s trust.

©2010 | Wilfred Visser | thebusinessofmining.com

An acquisition in aluminium: Vale of the trolls

May 10, 2010 Comments off

“A deal with Norway marks a change of course for a Brazilian mining giant … For Vale, ridding itself of its aluminium business, its third-biggest source of revenue after iron ore and coal, marks a significant change of course. Its purchase of Inco, a Canadian nickel miner, in 2006 and its failed attempts in 2008 to take over Xstrata, another big competitor, indicated that Vale’s strategy was to become a diversified global mining giant like Rio Tinto and BHP Billiton. But now, as Jordi Dominguez, an analyst at HSBC, puts it, the Brazilian company is ‘de-diversifying’.”

Source: The Economist, May 6 2010

Observations:

  • Vale has done a significant investment in the iron ore business and in the same week as sold its aluminium business.
  • HSBC and the Economist interpret these transactions as a significant change of course for the company. Where the company has been trying to diversify in the previous years, the Economist suggests Vale will focus more on the iron ore business.
  • The reason Vale has given for their ‘portfolio restructuring’ is the uncertainty of cheap energy supply in Brasil, which is crucial for a sustainable profitability of the aluminium business.

Implications:

  • One of the key messages of Vale’s latest investor presentation was that it would invest more in fertilizer nutrients. One of the major projects coming on steam is the Tres Valles copper project. These signs cannot really be explained as “de-diversification”.
  • HSBC and the Economist are likely to have drawn their conclusions too rapidly. Vale has reduced the risk in an important part of its business in a sound deal, at the same time reducing its dependency from the Brazilian government.