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Negotiations Between Iron Ore Producers Vale and Anglo American Are in Preliminary Stage
Vale S.A, the second largest iron ore producer in the world, is evaluating the possibility of acquiring a stake in the Minas-Rio system, Anglo American’s main project in Brazil, according to people with knowledge of the matter. According to sources from Infomoney, conversations between the two companies began in 2020, but so far have not advanced to the point of being brought to the boards of directors of the companies.
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One source also reported that Anglo American is not actively selling the system and that Vale is considering buying a 30% to 40% stake in the project, or even taking control. However, the conversations are in a preliminary stage and there are no guarantees that the deal will materialize. Anglo American and Vale did not comment.
The purchase would be another step for Vale to achieve its goal of increasing the annual production capacity of its main product to 400 million tons, which would help the miner dilute costs and regain the title of largest iron ore producer in the world. This title was lost to Rio Tinto following the disaster at the Brumadinho dam in January 2019.
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Vale seeks to position itself as one of the main suppliers of the fundamental ingredient in the steelmakers’ race, its main customers: premium iron ore, which aims to reduce carbon footprint. The Minas-Rio has high-quality ore, with approximately 67% iron content, a higher amount than the average content obtained in Vale’s operations.
Minas-Rio System
The Minas-Rio system is located in Conceição do Mato Dentro, Minas Gerais. It is a fully integrated iron ore export operation, with a mine, a processing plant, a 529-kilometer slurry pipeline, and a dedicated terminal at the Port of Açu in Rio de Janeiro. Anglo is trying to produce the full capacity of 26.5 million tons of iron ore per year at the project.
Acquired from MMX Mining and Metals in 2008, Minas-Rio cost Anglo American US$ 14 billion – which represents the largest investment in Vale’s existence, the S11D – between the total paid to former owner Eike Batista and implementation costs.
Despite the falling price of iron ore compared to the records achieved in recent months, Vale continues to generate significant cash flow. With a focus on maintaining capital discipline and paying its shareholders, the miner based in Rio de Janeiro is selling non-strategic assets to concentrate efforts on iron ore and base metals.
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