Vale Offers $1.14 Billion for Brazil's Paranapanema to Boost Copper Output

Vale SA, the world’s largest iron- ore miner, said it plans to buy Brazilian copper producer Paranapanema SA for 2.01 billion reais ($1.1 billion) as it seeks to become one of the world’s top producers of the metal.

Rio de Janeiro-based Vale offered to buy all Paranapanema’s voting stock for 6.30 reais a share at an auction on Sept. 1, according to a Brazilian regulatory filing today. The bid represents an 8.6 percent premium to yesterday’s closing price. The offer is subject to the purchase of at least 50 percent plus one of the company’s voting shares, according to Vale.

Vale, which already produces copper in Brazil and Canada, said it aims to become one of the world’s largest producers of the metal in the medium term, rivaling companies such as Xstrata Plc and Anglo American Plc. Vale said this month it plans to invest $400 million with African Rainbow Minerals Ltd. to develop a new copper mine at Konkola North, northern Zambia.

The acquisition is “positive on the strategic front” because it means Vale wouldn’t need to invest in additional smelting capacity to process copper from its Salobo and Alemao projects, Deutsch Bank analysts Rodrigo Barros and Jorge Beristain said in a note to clients today.

Paranapanema produces about 220,000 tons of copper cathodes per year at its Camacari smelter, in Brazil’s northeastern Bahia state, with an expansion project expected to take that to 277,000 tons. The company also produces 78,000 tons of semi- processed products such as sheet, tubes and bars at plants in Sao Paulo and Espirito Santo states.

Stock Gains

Vale rose 24 centavos, or 0.6 percent, to 42.74 reais in Sao Paulo trading at 2:49 p.m. New York time. Paranapanema jumped 7.1 percent to a three-month high of 6.23 reais.

Vale currently produces about 300,000 tons per year of copper from its Sossego mine in Brazil’s Para state and at the Canadian sites of Sudbury and Voisey’s Bay.

Brazilian pension funds Previ and Petros and the government’s BNDES development bank plan to sell their stakes in Paranapanema, Valor Economico newspaper reported June 18, without saying where it obtained the information.

Santiago-based Codelco, the world’s largest copper miner, produced about 1.78 million tons last year. Freeport-McMoran Copper & Gold Inc. is second, with 1.6 million tons. Xstrata is ranked as the fourth-largest producer and Anglo sixth, according to Bloomberg data.

To contact the reporter on this story: Carlos Caminada at ccaminada1@bloomberg.net

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