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MMX Iron Mines May Add 50 Percent to Capacity: CEO

Industry News 03:42:38PM Jun 01, 2012 Source:SMM

(Reuters) - MMX Mineração e Metais SA (MMXM3.SA) is studying iron ore mining projects in Brazil and Chile that could expand capacity by at least 50 percent over planned 2016 levels, its chief executive said on Thursday.

The projects, each with the potential for 10 million tonnes of output a year, are in the Bom Sucesso region of Brazil's Minas Gerais state and near Copiapó in northern Chile, MMX CEO Guilherme Escalhão told the Reuters Latin America Investment Summit.

If built, the mines would raise MMX's planned capacity to at least 58 million tonnes a year by 2020 from 38 million tonnes in 2016 and represent a third phase in an MMX expansion plan focused on the 4.8 billion real ($2.39 billion) Serra Azul project.

It will also allow MMX to take advantage of its iron-ore port near Rio de Janeiro which is being built to handle 50 million tonnes a year but is expandable to 100 million tonnes.

"As the port can handle up to 100 million tons, we're looking beyond Serra Azul," Escalhão said in Rio de Janeiro. "Bom Sucesso is part of our future potential to increase our own production of iron-ore."

The Bom Sucesso project has 360 million tonnes of certified reserves and would require about 30 to 40 kilometers (19 to 25 miles) of railway to link it to the MRS Logistica SA (MRSA3B.SO) railway that links Serra Azul to MMX's Sepetiba Bay port near Rio, he said.

The project also has attractive transport links, he said.

"The mine in Chile is only 80 kilometers from the coast and the port, and that's the main attraction there," he added. "The certified reserves are still small, but the research campaign there was only revived in 2011."

The port is also owned by Rio de Janeiro's EBX Group, Brazilian billionaire Eike Batista's energy, mining, oil, and shipbuilding group. MMX was founded by Batista, who is also its controlling shareholder.

MMX's immediate focus, though, is on Serra Azul, in the Iron Quadrangle mining district of Minas Gerais. The mine is under construction with partners Wuhan Iron and Steel WHISG.UL, China's No. 3 steelmaker, and SK Group (003600.KS), South Korea's largest conglomerate.

Wuhan owns 16 percent of MMX and has contracts to buy 50 percent of MMX output. SK, a major trader of commodities, owns 14 percent of MMX and a contract to buy 14 percent of future output.

With the bulk of finance for Serra Azul expected from state development bank BNDES BNDES.UL this year, capacity at the mine is expected to more than quadruple to 29 million tonnes a year by the first quarter of 2014 from about 6 million tonnes in 2011.

MMX also produces about 2 million tonnes a year from a mine near Corumbá, Brazil on the country's border with Bolivia.

In a second phase, MMX will develop the Pão de Vinho mine which is adjacent to Serra Azul. It will operate the mine for its owner, Japanese-Brazilian steelmaker Usiminas (USIM5.SA) under a 30-year lease and have the right to receive annually 7 million tonnes of the mine's 8-million-tonne-a-year output starting in 2016, he said.

Escalhão said he is not terribly concerned about a decline in iron-ore prices making his projects uneconomic. MMX could sustain $80 a tonne iron ore prices, levels 40 percent below current prices, and still make a profit.

Costs per tonne are estimated to be below $60 and "in the bottom quartile of costs among world producers," Escalhão said, meaning at least 75 percent of producers have higher mining costs than MMX.

"For the price to drop to $80 a tonne, a lot would have to happen in the world," he said. "And if that happened, a lot of production would disappear from the market helping maintain prices."

Iron ore with 62 percent iron content rose 1.73 percent on Thursday, its biggest one-day gain since February, to $134.80 a tonne in the Chinese spot market.

Iron ore has fallen about 10 percent since mid April and is expected to fall more if Greece leaves the euro zone, crimping world credit and causing global economic growth to slow.

For the next three years at least, Escalhão expects iron-ore to remain above the $100 to $120 range and probably at about current levels.

While current levels are more than a quarter below all time highs, they are more than double prices five years ago.

Prices for MMX ore will also be supported by quality, he said. Serra Azul ore has an average 66 percent iron content, four percentage points above the benchmark level for high-grade ore.

Additional financing for Serra Azul, 75 percent of which will be financed by debt, is expected to come from the China Development Bank, Korea's state development bank and the export finance arms of governments in Europe, Asia and North America, Escalhão said.

Work is being carried out using company cash and bridge loans from Itaú Unibanco (ITUB4.SA), Brazil's largest non-government lender, and Germany's WestLB (WDLGgf.F), he said.

Formal applications for new loans from BNDES are expected to be made in the coming weeks, he added.

MMX shares fell 6.35 percent to 6.34 reais in Sao Paulo trading on Thursday.


 

Key Words:  MMX   Brazil   Chile   capacity 

MMX Iron Mines May Add 50 Percent to Capacity: CEO

Industry News 03:42:38PM Jun 01, 2012 Source:SMM

(Reuters) - MMX Mineração e Metais SA (MMXM3.SA) is studying iron ore mining projects in Brazil and Chile that could expand capacity by at least 50 percent over planned 2016 levels, its chief executive said on Thursday.

The projects, each with the potential for 10 million tonnes of output a year, are in the Bom Sucesso region of Brazil's Minas Gerais state and near Copiapó in northern Chile, MMX CEO Guilherme Escalhão told the Reuters Latin America Investment Summit.

If built, the mines would raise MMX's planned capacity to at least 58 million tonnes a year by 2020 from 38 million tonnes in 2016 and represent a third phase in an MMX expansion plan focused on the 4.8 billion real ($2.39 billion) Serra Azul project.

It will also allow MMX to take advantage of its iron-ore port near Rio de Janeiro which is being built to handle 50 million tonnes a year but is expandable to 100 million tonnes.

"As the port can handle up to 100 million tons, we're looking beyond Serra Azul," Escalhão said in Rio de Janeiro. "Bom Sucesso is part of our future potential to increase our own production of iron-ore."

The Bom Sucesso project has 360 million tonnes of certified reserves and would require about 30 to 40 kilometers (19 to 25 miles) of railway to link it to the MRS Logistica SA (MRSA3B.SO) railway that links Serra Azul to MMX's Sepetiba Bay port near Rio, he said.

The project also has attractive transport links, he said.

"The mine in Chile is only 80 kilometers from the coast and the port, and that's the main attraction there," he added. "The certified reserves are still small, but the research campaign there was only revived in 2011."

The port is also owned by Rio de Janeiro's EBX Group, Brazilian billionaire Eike Batista's energy, mining, oil, and shipbuilding group. MMX was founded by Batista, who is also its controlling shareholder.

MMX's immediate focus, though, is on Serra Azul, in the Iron Quadrangle mining district of Minas Gerais. The mine is under construction with partners Wuhan Iron and Steel WHISG.UL, China's No. 3 steelmaker, and SK Group (003600.KS), South Korea's largest conglomerate.

Wuhan owns 16 percent of MMX and has contracts to buy 50 percent of MMX output. SK, a major trader of commodities, owns 14 percent of MMX and a contract to buy 14 percent of future output.

With the bulk of finance for Serra Azul expected from state development bank BNDES BNDES.UL this year, capacity at the mine is expected to more than quadruple to 29 million tonnes a year by the first quarter of 2014 from about 6 million tonnes in 2011.

MMX also produces about 2 million tonnes a year from a mine near Corumbá, Brazil on the country's border with Bolivia.

In a second phase, MMX will develop the Pão de Vinho mine which is adjacent to Serra Azul. It will operate the mine for its owner, Japanese-Brazilian steelmaker Usiminas (USIM5.SA) under a 30-year lease and have the right to receive annually 7 million tonnes of the mine's 8-million-tonne-a-year output starting in 2016, he said.

Escalhão said he is not terribly concerned about a decline in iron-ore prices making his projects uneconomic. MMX could sustain $80 a tonne iron ore prices, levels 40 percent below current prices, and still make a profit.

Costs per tonne are estimated to be below $60 and "in the bottom quartile of costs among world producers," Escalhão said, meaning at least 75 percent of producers have higher mining costs than MMX.

"For the price to drop to $80 a tonne, a lot would have to happen in the world," he said. "And if that happened, a lot of production would disappear from the market helping maintain prices."

Iron ore with 62 percent iron content rose 1.73 percent on Thursday, its biggest one-day gain since February, to $134.80 a tonne in the Chinese spot market.

Iron ore has fallen about 10 percent since mid April and is expected to fall more if Greece leaves the euro zone, crimping world credit and causing global economic growth to slow.

For the next three years at least, Escalhão expects iron-ore to remain above the $100 to $120 range and probably at about current levels.

While current levels are more than a quarter below all time highs, they are more than double prices five years ago.

Prices for MMX ore will also be supported by quality, he said. Serra Azul ore has an average 66 percent iron content, four percentage points above the benchmark level for high-grade ore.

Additional financing for Serra Azul, 75 percent of which will be financed by debt, is expected to come from the China Development Bank, Korea's state development bank and the export finance arms of governments in Europe, Asia and North America, Escalhão said.

Work is being carried out using company cash and bridge loans from Itaú Unibanco (ITUB4.SA), Brazil's largest non-government lender, and Germany's WestLB (WDLGgf.F), he said.

Formal applications for new loans from BNDES are expected to be made in the coming weeks, he added.

MMX shares fell 6.35 percent to 6.34 reais in Sao Paulo trading on Thursday.


 

Key Words:  MMX   Brazil   Chile   capacity