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MMX Could Become a ‘Shell’ in the Country’s Iron Ore Market If the “Infinite” Capital from the Partnership Between Eike and the Chinese Exists and Is Not a Fraud
The former billionaire Eike Batista, currently unable to assume executive positions, has been working hard to avoid another downfall and contain the bankruptcy of the mining company MMX, one of the few companies from the EBX group that remain in his hands. To that end, the businessman has joined forces with the private equity fund China Development Integration Limited (CDIL), which has promised to invest up to 200 million dollars (over 1.1 billion reais).
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A significant part of this amount would be to save the mining company MMX from bankruptcy, which is currently in judicial recovery and survives with three employees, in addition to relying on only one source of revenue.
Eike’s MMX Could Become a ‘Shell’ in the Country’s Iron Ore Market
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Guimarães envisions MMX becoming a “Shell” in Brazil’s iron ore market. “We have been negotiating for six months, talking to creditors and judicial administrators, checking for a way to bring the company back,” says the executive. “We will make MMX a ‘Shell’ of iron ore and, eventually, change its name because there is a whole baggage involving Eike behind it.” When questioned whether the Chinese would oppose the former billionaire’s participation in the future project, he says it is not quite like that: “Eike would leave MMX, but the Chinese fund’s statement has interest in seeing things with him. There is no prejudice whatsoever.”
The Rubicon claims that, with the amount to be invested, it will be possible to restructure Eike’s company, bringing the Bom Sucesso mine project (MG) to life and covering all its debts, something that is out of touch with reality: MMX has debts above 1 billion reais.
‘Infinite’ Capital from China May Not Exist
Last March, the mining company MMX announced in a relevant fact that it had reached an agreement to receive 50 million dollars from the company based in Hong Kong. However, everything indicates that this ‘infinite funding’ may not exist.
It was found by the Brazilian Association of Investors, Abradin, through a survey in the Hong Kong company registry, that the capital of the “multibillion” fund CDIL is only 128.6 dollars.
Moreover, the only director of the company, Andy Lai, chairman of the board of the Chinese company CDIL, is linked to a scandal involving a corporation created for currency evasion and money laundering. He is also a director of approximately 20 companies, all based at the same address.
The discovery may call into question CDIL’s plans to make a splash in the Brazilian market. In addition to promising a blank check to develop Eike’s mining projects, the Asian fund hinted at the possibility of purchasing Porto do Açu (another project of the former billionaire) and active participation in tenders promoted by the Ministry of Infrastructure, with investments in airports, railroads, and ports, in addition to opportunities in wind and solar energy generation.
So Far No Investment Has Happened, and According to Aurelio Valporto, President of Abradin, There Are Strong Evidence of Fraud
This dream asset portfolio was defined by the investment fund Rubicon, a partner of the Chinese in Brazil. “We went to Brasília to talk with the minister (of Infrastructure) Tarcísio Freitas to enter the Viracopos Airport,” says Pedro Guimarães, CEO of Rubicon. “We visited Porto do Açu. There is a huge interest to develop a beautiful energy project there,” he adds. A government employee confirmed the conversation with members of the ministry but downplayed the expectations of the Chinese fund. “They spoke ‘generally’ about investing in the country. But it’s a scam. We know how to distinguish what is concrete from what is not,” he said.
Rubicon announced in November that it would receive 200 million dollars to initiate the Chinese expansion in Brazilian soil, but so far nothing concrete has happened.
For the president of Abradin, Aurelio Valporto, there are strong evidences of fraud – not only in the financial market but also in the judiciary. “We are facing strong indications of market manipulation and even procedural fraud,” he says. “This Chinese fund is not serious, and what is being done is, above all, an attempt to humiliate the Brazilian judiciary, with a procedural fraud,” he asserts.
Furthermore, there is a contradiction in the fact communicated by the miner MMX of Eike to celebrate the agreement with the Chinese fund. While the petition speaks of a minimum capital contribution of 50 million dollars, the term sheet, a sort of letter of intent made between the companies involved in the deal, proposes that the fund invests up to 50 million dollars. It may seem like a detail, but it is a change that makes all the difference.
The Vetorial Mineração, responsible for the only revenue of Eike’s company currently (by making an annual payment of 500,000 dollars to MMX for the leasing of a mining complex in Mato Grosso do Sul), also sees the movement as an attempt to delay the company’s bankruptcy in court. “Our reading is that all this show was created in haste to reshuffle the cards of the judicial process. This way, they gain time and try to escape bankruptcy. I only see this type of scenario,” says Gustavo Correa, partner and advisor of Vetorial.
When questioned about the suspicion of fraud and whether a due diligence (a thorough analysis) of the operation was conducted, the CEO and investor relations director of MMX, Joaquim Martino, was evasive. “So far, all the communication that has been made with people leads us to believe that there is no fraud involved in the process. If there were fraud, it would have been identified by the several companies advising the operation,” he says, without detailing which companies were responsible for auditing the process.
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