R37,9bn deal firms Anglo's iron-ore position

Anglo American, the world’s second-largest resources group, on Thursday strengthened its iron-ore portfolio by announcing a $5,5-billion (R37,9-billion) deal that will see it take control of key projects in Brazil.

The group said in a statement to the JSE that it is holding exclusive negotiations with Mineração e Metálicos’s (MMX) controlling shareholder, Eike Batista, regarding the acquisition of his 63,6% shareholding in a new company that will be demerged from MMX.

The new company will own MMX’s current 51% interest in the Minas-Rio iron-ore project and 70% interest in the Amapa iron-ore project.

While MMX’s logistics business, LLX Logistica, will also be demerged from MMX as part of the same reorganisation, it will not be included in the Anglo American transaction.

Anglo American said under the proposed transaction it would pay about $5,5-billion for 100% of the issued and outstanding shares in the new company.

This equates to roughly $361,12 (or about R2 490) per share where it is assumed that each of the new company’s shares will be traded for each of the current MMX shares.

The mining giant has also agreed to make royalty payments to MMX beginning in 2025 for the Minas-Rio project and in 2023 for the Amapa project.

Anglo American has committed to extend an offer to the new company’s minority shareholders at the same price per share offered to Batista on completion of the initial transaction.

In this way it intends to secure 100% ownership of the Minas-Rio project, 70% of the Amapa project and 49% of LLX Minas-Rio, the owner of the Port of Acu.

Anglo acquired 49% of the Minas-Rio project for $1,5-billion (R10,3-billion) in April last year. This acquisition included 49% of LLX Minas-Rio.

Cynthia Carroll, CEO of Anglo American, said the Minas-Rio and Amapa iron-ore projects “are a great strategic fit for Anglo American” and, together with the planned Kumba expansions, would significantly increase its participation in the seaborne iron-ore market to approximately 150-million tonnes a year by 2017.

“Anglo American will continue to evaluate the substantial expansion potential of these projects, particularly given the extremely positive long-term prospects for the iron-ore industry,” Carroll said.

At 4.30pm on Thursday, shares in Anglo American were trading 3,92% or R14,90 lower at R365,10 on the JSE.—I-Net Bridge

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