Eike Batista’s MMX Mineracao & Metalicos SA mining company soared the most in three months after Trafigura Beheer BV and Mubadala Development Co. agreed to buy a controlling stake in its iron-ore port in Brazil.
MMX rose 8.1 percent to 1.07 reais at 3:30 p.m. in Sao Paulo after gaining as much as 18 percent, the most intraday since July 15. The increase pared losses this year to 76 percent, compared with a 10 percent decline in the benchmark Ibovespa. Securities linked to the port’s royalty revenues, called MMXM11, dropped 2.7 percent to 2.92 reais.
Trafigura, the world’s second-biggest metals trader, and Abu Dhabi’s Mubadala sovereign wealth fund agreed to buy 65 percent of a unit of MMX that controls the Sudeste port in Rio de Janeiro state by paying $400 million and assuming debt, MMX said in a statement late yesterday. With the new controlling shareholders, the unit, known as PortCo, will assume about 1.3 billion reais ($596 million) in debt from MMX’s mining business, the company said.
The agreement means Amsterdam-based Trafigura will control the Sudeste project in Rio state’s Itaguai harbor and provide a route to Asia and Europe for iron-ore producers based in landlocked Minas Gerais, Brazil’s largest mining state, including an ArcelorMittal unit. Vale SA, the world’s biggest iron-ore producer, and Cia. Siderurgica Nacional SA also operate terminals in Itaguai, which is linked to Minas Gerais by railway.
After the deal, MMX will hold a 35 percent stake in PortCo and as part of a shareholders agreement with Trafigura and Mubadala, will have the right to designate a board member to the venture. MMX will also have the option to buy an additional 7.5 percent stake of PortCo.
The agreement, which is contingent on government approvals and the restructuring of existing debt at MMX and its units, is expected to close before the end of this year, Trafigura and Mubadala said in e-mailed statements. MMX shareholders won’t be able to exercise preemptive rights on the transaction since PortCo is not a fully owned subsidiary of the company, MMX said.
The Trafigura-Mubadala partnership will be able to buy iron ore locally from smaller producers and ship it abroad at higher prices, said Luis Nepomuceno, a partner at Belo Horizonte, Brazil-based consulting firm LCN Mining and Metals.
“A lot of iron ore, which is currently sold domestically to bigger miners or steelmakers, will be exported through the port,” he said by telephone. “They will also be able to sell port services to other producers.”
Batista, 56, this year sold stakes in his power-generation, oil and shipping ventures and relinquished control of his port developer LLX Logistica SA after missed output targets triggered a collapse in the valuation of his companies, erasing most of his fortune. Oil producer OGX Petroleo & Gas Participacoes SA, the centerpiece of Batista’s commodities group, is considering filing for bankruptcy protection by the end this month, two people with direct knowledge of the plan said on Oct. 4, after the company said it would miss a $45 million payment on dollar-denominated bonds.
Sudeste, located about 90 kilometers (56 miles) west of downtown Rio, can handle as many as 50 million metric tons of iron ore a year and is scheduled to start operations in mid-2014, MMX said in a Sept. 10 filing. That’s almost a three-year delay from Batista’s most optimistic estimates.
Brazil exported 234.4 million metric tons of iron-ore in the first nine months of the year, 2.3 percent more than in 2012, according to the country’s Development and Trade Ministry. Australia is the world’s largest exporter of the key raw material in the production of steel.
MMX, Brazil’s fourth-largest iron ore producer, said in June it was in talks to sell a stake or assets to companies including Trafigura and Glencore, the largest publicly traded commodities supplier. Chief Executive Officer Carlos Gonzalez said Aug. 15 that MMX was seeking to sell the entire company.
Mubadala said in July that it restructured a $2 billion investment in EBX Group Co., Batista’s holding company, after a stock-market rout pushed down the value of the former billionaire’s businesses. Mubadala, which had said that EBX had redeemed a “significant portion” of its original investment, will be repaid over four years, according to the wealth fund’s first-half report published Sept. 26.