MMX Mineracao & Metalicos SA, the mining unit of former billionaire Eike Batista, will temporarily stop operations at its only producing mine as it seeks to avoid bankruptcy protection amid lower metal prices.
The Brazilian iron-ore producer will give workers at its Serra Azul unit in Minas Gerais state a 30-day “collective vacation,” MMX said in a statement today. The furlough will begin during the first week of September.
“The necessity of the collective vacation and temporary stop of the production activities at the Serra Azul Unit is a consequence of the significant and prolonged decline of the iron-ore price,” MMX said in the statement. The measure also stems from “the operating restrictions imposed by the environmental authorities of the state of Minas Gerais.”
MMX is reviewing its business plan to bolster cash as iron-ore prices decline. The company will pay workers during the furlough, MMX said in an e-mailed reply to questions.
Batista, once Brazil’s richest person, has been selling assets as missed targets, mounting debt and accumulating losses forced his oil and shipbuilding companies to enter Brazil’s so-called judicial recovery proceedings last year. The entrepreneur earlier this month agreed to transfer two stakes in MMX and port developer Prumo Logistica SA to Mubadala Development Co. as part of a deal to restructure a $2 billion investment provided by the Abu Dhabi government-owned investor.
MMX fell to the lowest since its 2006 listing today after Veja magazine columnist Lauro Jardim wrote Aug. 18 that the company will seek bankruptcy protection by the end of August. While MMX has no immediate plans to seek court protection from creditors, it remains an option, a person familiar with the strategy told Bloomberg News yesterday, asking not to be named because the process is private.
The Rio de Janeiro-based company is seeking to sell or lease its remaining assets, the person said.
“There is no deliberation under way” on a bankruptcy protection filing, the company said in a regulatory filing yesterday. MMX declined to comment further on the possibility in an e-mailed response to Bloomberg News.
MMX had record losses last year after putting on hold an expansion of Serra Azul and writing down the value of its assets. In February, the company sold a controlling stake in a key iron-ore port project in Rio and last month agreed to lease its Corumba mine to Vetria Mineracao SA.
The shares dropped 8.5 percent to 97 centavos in Sao Paulo, extending a record low. MMX was the worst-performer on the benchmark Ibovespa index today. The stock has lost 93 percent of its value in the past 12 months.
MMX produced 1.39 million metric tons of iron ore at Serra Azul during the first quarter, a 6 percent increase from a year ago. The company postponed the release of its second-quarter results to Oct. 15 from last week as part of the review of its business plan.
Iron-ore prices for immediate delivery to the Chinese port of Tianjin dropped 0.8 percent to $92.30 a ton today, the lowest in two months, according to a price index compiled by The Steel Index Ltd. The steelmaking ingredient has declined 34 percent in the past 12 months.