Negotiations between iron ore producers Vale and Anglo American are at a preliminary stage
Vale SA, the second largest iron ore producer in the world, is evaluating the possibility of acquiring a share in the Minas-Rio system, Anglo American's main project in Brazil, according to people with knowledge of the matter. According to infomoney sources, talks between the two companies began in 2020, but so far they have not progressed to the point of being taken to the boards of directors of the companies.
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One of the sources 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 controlling it. However, talks are at a preliminary stage and there are no guarantees that the deal will go through. Anglo American and Vale did not comment.
The purchase would be another step for Vale to reach the objective of increasing the annual production capacity of its main product to 400 million tons, a fact that would help the mining company to dilute costs and regain its title as the largest iron ore producer in the world. . The latter was lost to Rio Tinto in the wake of the Brumadinho dam disaster in January 2019.
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Vale seeks to position itself as one of the main suppliers of the fundamental ingredient in the race for steelmakers, its main customers: premium iron ore, which seeks to reduce the carbon footprint. Minas-Rio has a quality ore, with approximately 67% iron content, an amount higher than the average content obtained in Vale's operations.
Minas-Rio System
The Minas-Rio system is located in Conceição do Mato Dentro, in Minas Gerais. It is a fully integrated iron ore export operation, comprising a mine, a beneficiation plant, a 529-kilometer pipeline and a dedicated terminal at the Port of Açu, in Rio de Janeiro. Anglo tries to produce the full capacity of 26,5 million tonnes of iron ore per year in the project.
Acquired from MMX Mineração e Metálicos in 2008, Minas-Rio cost Anglo American US$ 14 billion - which represents the largest investment in Vale's existence, the S11D -, between the total amount paid to former controlling shareholder Eike Batista and the implementation .
Despite the fact that the value of iron ore is falling compared to the records reached in recent months, Vale continues to produce a lot of cash. With a focus on maintaining capital discipline and paying its shareholders, the mining company that is headquartered in Rio de Janeiro is selling non-strategic assets to focus efforts on iron ore and base metals.