MMX could become a 'Shell' in the country's iron ore market if the "infinite" capital of the partnership between Eike and the Chinese exists and it is not a fraud

O former billionaire Eike Batista, currently unable to assume executive positions, has been working hard to avoid another fall and contain the bankruptcy of the mining company MMX, one of the few companies of the EBX group that remained in his hands. For this, the businessman joined the fund of private equity China Development Integration Limited (CDIL), which promised to contribute up to 200 million dollars (over 1,1 billion reais).

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A good part of this amount would be used to save the mining company MMX from bankruptcy, which is currently in judicial recovery and survives with three employees, in addition to having only one source of income.

Eike's MMX could become a 'Shell' in the country's iron ore market

Os plans stated by Rubicon CEO for the mining company owned by former billionaire Eike Batista are to rid the mining company of bankruptcy and, subsequently, file a new request for judicial recovery.

Guimarães sees MMX becoming a “Shell” in the Brazilian iron ore market. “We've been negotiating for six months, talking to creditors and court administrators, looking for a way to bring the company back”, says the executive. “We are going to make MMX a “Shell' of ore and, eventually, change its name, because there is a whole load behind it involving Eike”. Asked if the Chinese would be against the participation of the former billionaire in the future project, he says that is not the case: “Eike would leave MMX, but the statement from the Chinese fund is interested in seeing things with him. There is no prejudice.”

A Rubicon states that, with the amount to be contributed, it will be possible to restructure Eike's company, taking the Bom Sucesso (MG) mine project off the ground and paying all its debts, something that is at odds with reality: MMX has debts above of the house of 1 billion reais.

China's 'infinity' capital may not exist

Last March, the mining company MMX disclosed in a material fact which had reached an agreement to receive US$50 million from the Hong Kong-based company. Everything indicates that this 'infinite amount', however, may not exist.

It was verified by the Brazilian Association of Investors, Abradin, through a search in the Hong Kong companies registry, that the capital of the “multibillionaire” CDIL fund is only 128,6 dollars.

Furthermore, the sole director of the company, Andy Lai, chairman of the Chinese company CDIL, is linked to a scandal involving a corporation created for currency evasion and money laundering. He is still director of approximately 20 companies, all headquartered at the same address.

The discovery could jeopardize CDIL's plans to make noise in the Brazilian market. In addition to promising a blank check to develop Eike's mining company's projects, the Asian fund offered the possibility of purchasing the Port of Açu (another work by the former billionaire) and active participation in auctions promoted by the Ministry of Infrastructure, with investments in airports, railways and ports, as well as opportunities in wind and solar power generation.

So far, no investment has taken place and according to Aurelio Valporto, president of Abradin, there is strong evidence of fraud

This range of dream assets was defined by the Rubicon investment fund, a partner of the Chinese in Brazil. “We went to Brasilia to talk to Minister (of Infrastructure) Tarcísio Freitas about entering Viracopos Airport”, says Pedro Guimarães, CEO of Rubicon. “We visited the Port of Açu. There is huge interest to develop a beautiful energy project there”, he adds. A government official confirmed the conversation with members of the portfolio, but minimized the expectations of the Chinese fund. “They spoke 'roughly' about investing in the country. But it's broken. We know how to distinguish what is concrete from what is not, ”she said.

Rubicon announced in November that it would receive 200 million dollars to start the Chinese expansion in Brazilian soil, but so far nothing concrete has happened.

For the President of Abradin, Aurelio Valporto, there is strong evidence of fraud – not only in the financial market, but also in the judiciary. “We are facing strong indications of market and even procedural manipulation”, he says. “This Chinese background is not serious and what is being done is, above all, an attempt to humiliate the Brazilian judiciary, with procedural fraud”, he attacks.

In addition, there is a contradiction in the fact communicated used by the mining company MMX from Eike to conclude the agreement with the Chinese fund. While the petition mentions a capital contribution of at least US$50 million, the term sheet, a kind of letter of intent signed between the companies involved in the deal, proposes that the fund invest up to US$50 million. It may seem like a small detail, but it's a change that makes all the difference.

A Mining Vector, currently responsible for Eike's company's only revenue (by making an annual payment of US$500.000 to MMX for the lease 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 this whole set of scenes was created in a hurry to reshuffle the cards of the judicial process. Thus, they buy time and try to escape bankruptcy. I only see this type of scenario”, says Gustavo Correa, partner and adviser at Vetorial.

Asked about the suspicion of fraud and whether a due diligence (an in-depth analysis) of the operation was carried out, MMX's CEO and investor relations director, Joaquim Martino, it was elusive. “So far, all the dialogue that has been done with people leads us to believe that there is no fraud involved in the process. If there had been fraud, this would have been identified by the various companies advising the operation”, he says, without detailing which companies were responsible for carrying out the audit in the process.

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