Agnelli Bets on Metals After Leading Vale Boom: Corporate Brazil

Agnelli Bets on Metals After Leading Vale Boom
Roger Agnelli said, “We’re not a fund - we’re operators.” Photographer: Craig Ruttle/Bloomberg

Roger Agnelli, who oversaw a 10-fold surge in shares as head of Vale SA, is setting up his own commodities empire on a bet metal and food prices will resume a rally.

Agnelli, 53, this year founded a firm to invest in commodities ventures from a biodiesel plant to make fuel for jets in Brazil to a deep-water port project in Africa. In July, he teamed up with billionaire Andre Esteves’s Banco BTG Pactual SA to create B&A Mineracao SA, which has bought a controlling stake in Cuprum Resources Corp., a closely held company with copper assets in Chile, Agnelli said. He declined to disclose financial terms of the deal.

“We’re not a fund -- we’re operators,” Agnelli said at the Sao Paulo office of his holding company, AGN Agroindustrial, Projetos & Participacoes Ltda. “We’ll invest in companies that we will operate. We believe in our implementation and production capacity.”

The Standard & Poor’s GSCI Spot Index of 24 raw materials, which increased almost fourfold since 2001, had retreated 1.9 percent this year through yesterday as growth slowed in China, the world’s biggest consumer of copper, iron ore and soybeans.

Agnelli left as chief executive officer of Vale last year after the government publicly criticized him for not investing enough in Brazil. Under Agnelli, Rio de Janeiro-based Vale became the world’s second-largest miner by market value.

Iron Slump

The stock has plunged 22 percent since April 4, 2011, the day Vale said it would replace Agnelli, as iron-ore prices declined. That compares with a 15 percent drop for Brazil’s benchmark Bovespa index. Vale, the world’s largest iron-ore producer, trades at 6.4 times estimated 2013 earnings, compared with an average 10.9 for companies on the Bovespa.

Vale advanced 1.4 percent to 37.43 reais at the close in Sao Paulo today, the highest since Sept. 20.

Agnelli “is very aggressive in terms of his management style; he made a couple of aggressive moves extending Vale’s business,” Ed Kuczma, who helps manage about $36.4 billion at Van Eck Associates Corp., said in a telephone interview Dec. 7. “While he was there, the company did a great job of increasing the share price and also giving back money to investors in terms of dividends,” he said about Vale.

AGN is a holding company structured around four business units: B&A, biofuels, logistics and commodities trading. Agnelli tapped executives from Vale, as well as Brazilian steelmaker Cia. Siderurgica Nacional SA and Monsanto Co. to run the units.

‘New Moment’

His increased interest in metals and crops, with a focus on ventures in Brazil and Africa, comes as Vale scales back its operations. The commodities industry may be nearing the end of a super-cycle, requiring companies to be stricter with capital expenditures, Murilo Ferreira, who succeeded Agnelli at Vale, said during a presentation to investors in New York on Dec. 3.

“We are living a new moment in the mining industry,” Ferreira said. “The new scenario requires stricter discipline in capital allocation.”

Agnelli remains unfazed. Demand for commodities will rebound as the world’s population expands and rising incomes swell the ranks of the middle class in emerging markets, boosting consumption, he said.

“We will need more raw materials to guarantee the production of all that, from fertilizers to minerals,” he said in the interview as he pointed to Brazil and Africa on a map of the world that covered one wall of his office.

Risk Taking

Agnelli, who previously headed the investment arm of Banco Bradesco SA, Latin America’s second-largest bank by market value, joins a list of Brazilian entrepreneurs taking risks to set up their own ventures, said Joao Augusto de Castro Neves, an analyst at Eurasia Group.

“His growth numbers at Vale are impressive,” Neves said in a telephone interview from Washington, D.C. “He’s taking his experience at Vale and applying it initially in a smaller and diversified scale.”

AGN, which has about 40 employees, won’t consider selling shares until after its projects start producing, Agnelli said.

“I will go to the public and get money only after I can show the clear potential of the projects I have,” he said. “We will need partners, initially strategic partners but further in the future we may even look at capital markets, open the capital of these companies.”

Agnelli’s minority partners in AGN include Fabio Spina, a former Vale general counsel; Carolina Menezes, a former investment banker with Goldman Sachs Group Inc; Banco Indusval SA’s co-CEO Jair Ribeiro; and Alfredo De Goeye, chairman of trading firm Sertrading SA.

“Things are going a bit slow considering my temperament, but I think quite quickly,” he said, making fun of his alleged eagerness for performance. “For one that didn’t want to have an executive life, I am even having quite a bit of fun.”

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