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Posts Tagged ‘BSG Resources’

BSG on prowl for high-class mining assets

May 25, 2010 Comments off

“One of the leading resource groups is on the hunt for world-class mining assets.
Beny Steinmetz Group, a private conglomerate, is stepping up its activities after the success of a $2.5bn iron ore deal in west Africa.
In a rare interview, BSG’s chief executive told the Financial Times that last month’s sale of its 51 per cent interest in its Guinean subsidiary to Brazil’s Vale, the world’s biggest iron ore miner, has prompted the move.
‘We are not focusing on ‘doable’ assets, but world-class assets,’ said Dag Cramer, chief executive. The company’s founder Beny Steinmetz – a billionaire Israeli entrepreneur – still plays a prominent role in arranging deals for BSG.”

Source: Financial Times, May 24 2010

Observations:

  • The sale of the Simandou South concession to Vale has delivered BSG $2.5 bln, of which $0.5 bln in cash.
  • BSG still owns 13 bauxite concession in Guinea, a diamond project in Sierra Leone and a steel/scrap project in Azerbaijan.
  • According to Dag Cramer, CEO of the conglomerate owning BSG Resources, the company is aiming for world-class assets and has 1 or 2 deals in the pipeline.

Implications:

  • Not only BSG is looking for world-class assets; all mining firms are. The difference between the firms is that BSG is betting on deposits in countries that currently are not very stable, hoping that these assets will increase in value if stability increases.
  • One of the deals in BSG’s pipeline might result from their uranium exploration project.
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Vale acquires Simandou iron ore assets

May 1, 2010 Comments off

“Vale announces it has acquired from BSG Resources Ltd. (BSGR), a 51% interest on BSG Resources (Guinea) Ltd., which indirectly holds iron ore concession rights in Guinea, in Simandou South (Zogota), and iron ore exploration permits in Simandou North and Blocks 1 & 2. In an all-cash transaction, Vale will pay US$ 2.5 billion, of which US$ 500 million is payable immediately and the remaining US$ 2.0 billion on a phased basis upon achievement of specific milestones.”

Source: Vale press release, April 30 2010

Observations:

  • Vale completes a $2.5bn cash transaction, continuing the trend to grow through small acquisitions that are easily integrated in the company.
  • The Debt to Equity ratio after this transition still is the most favorable of the giant players at approx. 0.83 (vs. 0.86 for BHP Billiton, 1.16 for Anglo American and 1.22 for Rio Tinto).
  • Cash available is reduced significantly (although $2.0bn of the deal is not to be paid immediately).

Implications:

  • Vale continues to grow by small acquisitions and to enlarge its take of the global iron ore market. It could be a matter of time before the companies takes the number 1 position in global mining revenues.
  • Vale seems not to be hoarding cash for a potential Rio Tinto acquisition, while BHP might reconsider buying Rio Tinto in case the Australian competition regulator decides against the proposed Pilbara joint venture.