Norsk Hydro Seeks to Buy Vale Stake in Brazil Bauxite Mine

  • Norway's Hydro seeking to become largest ower in MRN
  • Hydro says will strengthen position in bauxite, alumina

Norsk Hydro ASA, Europe’s third largest aluminum producer, signed a letter of intent to acquire Vale SA’s 40 percent stake in Brazilian bauxite producer Mineracao Rio do Norte SA, one of the largest suppliers of the mineral.

Hydro is seeking support from MRN’s other shareholders to raise its stake to 45 percent in the Brazilian company, which produces 18 million metric tons of bauxite a year or about 7 percent of global supply, Oslo-based Hydro said in a statement on Friday. The terms have yet to be agreed on.

“MRN is a well-operated mining operation with a competitive cost position due to its high-quality bauxite, attractive strip ratio and economy-of-scale benefits,” the company said. The deal “would strengthen Hydro’s global position as a long player in bauxite and alumina,” it said.

The aluminum industry is reshaping as producers deal with a glut caused by slowing demand from China that created an oversupply of the lightweight metal used in airplanes, cars and buildings. Alcoa Inc. will split up into an upstream and downstream company, it announced in September.

Vale’s stake may be valued at $500 million to $1 billion, according to Christian Georges, an analyst at Societe Generale SA. The Rio De Janeiro-based miner is selling assets as it focuses on completing the iron-ore industry’s largest project. Its shares gained as much as 2.6 percent in Sao Paulo on Friday.

Vale declined to comment when contacted by Bloomberg.

Hydro rose as much as 7.3 percent in Oslo, the most since October 2013, and was up 6.1 percent at 33 kroner as of 3:49 p.m in the Norwegian capital.

Hydro bought Vale’s other Brazilian aluminum assets in 2011 in a $5.3 billion deal that included stakes in the Alunorte alumina refinery and the Paragominas bauxite mine. That also included commercial agreements for Vale’s bauxite offtake in MRN.

Alcoa owns an 18.2 percent stake in MRN, South32 Ltd. holds 14.8 percent, Rio Tinto Plc 12 percent and CBA 10 percent.

MRN was set up after Alcan discovered the first bauxite deposits in Latin America’s largest economy during early 1960s, with Vale involved in the project since 1971 and operations starting in 1979. Bauxite is an aluminum ore.

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