Mariana Durao, Cristiane Lucchesi and Mark Burton
Thu, December 23, 2021
(Bloomberg) -- Vale SA, the world’s second-largest iron ore producer, is considering acquiring a stake in Anglo American Plc’s huge Minas-Rio project in Brazil, according to people familiar to the matter.
Preliminary talks that started last year so far haven’t advanced enough to be presented to the companies’ boards and may not result in a deal, the people said, asking not to be named because the talks are private. Vale is considering buying a 30% to 40% stake in the project, or even a controlling interest, one of the people said.
Anglo American and Vale declined to comment.
A deal would help Vale fulfill its goal of increasing annual production capacity to 400 million tons, enabling it to dilute costs and recover the title of world’s No. 1 iron-ore producer that it lost to Rio Tinto Group in the wake of the Brumadinho dam disaster in 2019.
The Rio de Janeiro-based company also wants to position itself as a top supplier of premium iron ore, a key ingredient for steelmakers to reduce their carbon footprint. Anglo’s Minas-Rio has a high-grade ore of about 67% iron content, higher than Vale’s average.
Minas-Rio is a fully integrated iron ore operation, with a mine in Minas Gerais State, a processing plant, a slurry pipeline, and a port in Rio de Janeiro. The project is expected to produce 26.5 million tons a year. Acquired from MMX Mineracao e Metalicos SA in 2008, Minas-Rio cost Anglo American about $14 billion to buy and build.
Thanks to a surge in metals prices in recent years, Minas-Rio has gone from a liability to a cash cow for Anglo American, leading the company to scrap plans to sell the mine.
Even with prices of its core product down from record highs in recent months, Vale continues to generate plenty of cash. Focused on capital discipline and returning value to shareholders, the miner has been divesting non-core assets to sharpen its efforts on iron ore and base metal deposits.
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