MMX Mineracao & Metalicos SA, the iron-ore producer controlled by Brazilian billionaire Eike Batista, will seek $1.8 billion in loans for its Serra Azul project as soon as late September.
MMX aims to start a so-called road show in 45 to 90 days, Chief Financial Officer Guilherme Escalhao said in an interview. MMX, which is working with advisers Banco Itau BBA SA and West LB do Brasil SA, will have the financing completed before year-end and expects to pay interest of 200 to 300 basis points above the London interbank offered rate, he said.
“We don’t have any indication yet that this is a credit or liquidity crisis,” MMX Chief Executive Officer Roger Downey said about the recent downturn in global financial markets. He and Escalhao spoke yesterday in an interview at the company’s headquarters overlooking the Flamengo beach in Rio de Janeiro.
MMX plans to spend at least 7.3 billion reais ($4.5 billion) to more than quadruple iron-ore output capacity to 46 million metric tons by 2016 and tap rising demand for minerals in China and other emerging nations. Shares for the company have plunged 38 percent since the start of 2011 amid a global equity rout.
Price fluctuations in international markets is unlikely to derail the company’s financing plans, Escalhao said, adding that he expects to get the loans from between six and 12 banks.
When a company has iron-ore projects geared toward exports with supply agreements and committed shareholders, “you will seek certain sources of financing where pricing doesn’t constantly change,” Escalhao said. “Before the end of the year, we need this funding in place for when we start construction.”
The 4 billion-real Serra Azul project in the southeastern Brazilian state of Minas Gerais includes the construction of a new processing plant, a railway terminal and a conveyor belt to transport ore from the mine to the terminal. The iron ore will be exported through MMX’s Sudeste port in Rio state that the company expects to be ready by the end of 2012 with an initial capacity to ship as much as 50 million metric tons a year.
MMX will get a “boost” in revenues of as much as $100 a ton of iron ore once the company starts operating its own port, Downey said, adding that MMX will export all of its output after 2013. Exports accounted for about 37 percent of MMX’s total sales in the second quarter.
“Buying on the local market and selling as exports is a good business,” Downey said.
MMX this week posted a second-quarter profit of 90.9 million reais as iron-ore production rose 17 percent to 2.16 million tons and prices for the steelmaking raw material climbed. The miner, which doesn’t disclose annual output targets, expects to receive the environmental license for Serra Azul before the end of the year, Downey said.
MMX rose 59 centavos, or 9.2 percent, to 7 reais in Sao Paulo, its biggest gain since Oct. 29, 2009.