By Alberto Alerigi
SAO PAULO Aug 21 Brazilian steelmaker Usinas
Siderúrgicas de Minas Gerais SA said on Wednesday it
has no interest in taking control of mining company MMX
Mineração e Metálicos SA.
The two firms share assets in mining and logistics.
Usiminas, as Usinas is known in Brazil, has an
agreement with MMX for sharing port facilities that
could be used to ship iron ore to clients outside Brazil.
Usiminas is demanding compensation from MMX related to delays in
construction of the port, known as Porto do Sudeste, executives
While acknowledging that MMX, which is controlled by
embattled Brazilian tycoon Eike Batista, may be up for sale,
Usiminas Chief Financial Officer Ronald Secklemann said
speculation over a deal with MMX "is not concrete."
"MMX concerns us only as a fully-operating port," Secklemann
told industry analysts.
Cia Siderúrgica Nacional SA, Brazil's largest
diversified steelmaking group and a fierce rival of Usiminas in
the flat steel market, is interested in acquiring control of MMX
from Batista, a source with direct knowledge of the situation
told Reuters on Tuesday. Another source said other companies may
also be ready to bid for MMX, which is struggling with
development of its iron ore mining operations and a port.
For the past three years, Usiminas has dealt with a rigid
cost structure that includes a lack of proprietary energy and
mining assets and aging mill facilities. It is also struggling
with rampant competition from cheap imported flat steel products
and a slowdown in Brazil's economy, now entering its third year.
Analysts say acquiring MMX could help the expansion of
players like Usiminas, but they see the impact of MMX's rising
debt, dwindling cash and execution delays as potential obstacles
to an acquisition.
Preferred shares of Usiminas, the company's most widely
traded class of stock, shed 0.4 percent to 10.23 reais in early
Wednesday trading in São Paulo. MMX jumped 6.6 percent, paring
its decline over the past 12 months to 56 percent.
Batista, 56, has already sold controlling stakes in two of
six publicly listed firms in his Grupo EBX holding company -
power producer MPX Energia SA and port and logistics
operator LLX Logística SA. Officials at MMX told
investors last week that the iron ore producer would soon have a
new controlling shareholder, but did not elaborate.
In a securities filing late Tuesday, MMX acknowledged that
it is looking for business opportunities that could "enhance
value creation for shareholders," without saying whether any of
those initiatives include a merger or acquisition.
Under terms of its accord with MMX, Usiminas agreed to use
Porto do Sudeste to ship its iron ore exports between 2012 and
2016. The steelmaker will pay a fee of $12.63 per tonne
transported, annually adjusted by U.S. producer price index.
In addition, MMX will be in charge of the licensing,
investment and operation of Usiminas-controlled Pau de Vinho ore
mine. The company will take 86.5 percent of the volume produced
and transfer the remainder to Usiminas.
The accord was signed in November 2010. Executives at
Usiminas said at the time that the deal would give the company,
which had mining assets and access to railroad transportation
but not a port, the chance to profit from its iron ore
resources. Usiminas expects sales of iron ore to surpass those
of last year should Porto do Sudeste start operations before
year-end, the executives said.
Executives at Usiminas said they see the price of iron ore
stabilizing at levels around $125 a tonne though next year. The
company will spend up to 1.2 billion reais ($498 million) in
fixed capital and other investments next year, Secklemann added.