BELO HORIZONTE, BRAZIL MMX, a mining company controlled by Brazilian tycoon Eike Batista, should honor a contract to pay Brazil's MRS railway for iron ore shipments even if its mines are not ready to produce, Vale SA (VALE5.SA) Chief Executive Murilo Ferreira said on Tuesday.
MMX Mineração e Metálicos SA (MMXM3.SA) has a take-or-pay contract with the MRS Logística SA (MRSA3B.SO) railway to ship 36 million tonnes of iron ore a year through 2026 at 26.46 reais ($12.03) a tonne. The iron ore was to be shipped from MMX mines in Minas Gerais state to MMX's Sudeste Port near Rio de Janeiro.
The contract states MMX must pay for at least 80 percent of the total contracted volume starting in 2017 whether it actually ships the iron ore or not, according to MMX's website.
Vale owns 38 percent of MRS's voting stock and 42 percent of its total capital, making the Rio de Janeiro-based miner the railway's largest shareholder.
MMX has slowed development of the Minas Gerais iron ore projects in the wake of Batista's financial problems and the resulting difficulties at MMX and other companies in his EBX mining, energy, shipbuilding and port-operations group.
As a result of its difficulties, MMX has sought to renegotiate the MRS contract and other accords with suppliers.
Most EBX companies have lost 90 percent or more of their value in the past year as Batista has found it hard to raise new capital to keep his largely revenue-less start-ups going without giving up control to new investors.
MMX rose 0.6 percent to 1.69 reais in early afternoon trading in São Paulo on Tuesday. Vale preferred shares, the company's most-traded class of stock, fell 1.25 percent to 35.56 reais.
OPENING U.S. MARKET
Ferreira also said on Tuesday that Vale is in talks to sell iron ore pellets to a customer in the United States, the only major market where the world's largest ore producer has no significant business.
Vale has no pellet sales in the United States, the world's largest economy, Ferreira said during a speech at a mining conference in Belo Horizonte, Brazil.
Even though Brazilian iron ore has a higher iron content than U.S. ores, most U.S. steelmakers get their ore from mines in and around the Great Lakes, which provide cheap water transportation for the heavy raw material.
(Reporting by Sabrina Lorenzi; Writing and additional reporting by Jeb Blount in Rio de Janeiro; Editing by Gerald E. McCormick and Peter Galloway)