Abu Dhabi Fund Boosts Mining Deals With Trafigura Venture

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Abu Dhabi-backed investment fund Mubadala Development Co. is buying a 50 percent stake in Trafigura Beheer BV’s Spanish copper business as part of an agreement to create a joint venture to invest in base metals mining.

Mubadala will purchase the stake in the commodity trader’s flagship Minas de Aguas Tenidas operations, which include three mines and processing facilities in southern Spain, the companies said Monday in a joint statement. Mubadala paid about $500 million, according to a person familiar with the matter, who asked not to be named because the price isn’t public.

Mubadala is helping drive the Abu Dhabi government’s plans to diversify away from hydrocarbon resources responsible for much of the sheikdom’s wealth. The investment firm is chaired by the Crown Prince of Abu Dhabi and has investments spanning energy, aerospace, real estate, healthcare, defense and finance.

The deal comes after a two-year investment program by Trafigura to double processing capacity at the Spanish operation to 4.4 million metric tons per year. It also heralds a potential new force in mining investment to rival ex-Xstrata Chief Executive Officer Mick Davis’s X2 Resources amid a slump in prices that saw copper fall to a four-month low last week.

Capacity at the operation known as MATSA is expected to double again over the next two years and the investment is a “key step” in Mubadala expanding and diversifying its metals and mining portfolio, Ahmed Yahia Al Idrissi, CEO of Mubadala Technology and Industry, said in the statement.

Joint Venture

Trafigura and Mubadala formed a separate joint venture last year to purchase a controlling stake in the Sudeste iron-ore port in Brazil for $400 million. The port recently lost its only client amid construction delays as the terminal failed to open more than three years after it was scheduled to. They bought the stake from a venture of former billionaire Eike Batista, who envisioned the project.

Mubadala had invested $2 billion with Batista’s EBX Group Co. in 2012, which valued the former boat-racing champion’s empire of logistics and commodities companies at more than $35 billion. The deal soured later that year when missed targets, mounting debt and accumulating losses forced Batista to cancel projects and sell assets amid a share price slump.

The world’s second-largest metals trader, Trafigura has increased its focus on mining investments under CEO Jeremy Weir to secure guaranteed supply for its trading business through offtake agreements. After metals and minerals trading head Simon Collins resigned last month, Weir took responsibility for the business, in addition to his CEO duties.

Trafigura won a battle in April to appoint two directors to the board of Nyrstar NV, the world’s biggest zinc-smelting company, in which the Amsterdam-based commodity trader owns a 15.3 percent stake.

Trafigura, with major trading operations in Geneva, moved last year to oust the chairman and board of EMED Mining Public Ltd., in which it now owns an 22 percent stake, according to data compiled by Bloomberg.

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