China’s WISCO to invest $400 million in Brazilian iron ore miner MMX

In another move to secure long term supply of iron ore for its steel plants, China's third-largest steel producer Wuhan Iron and Steel (Group) Co. (WISCO) reached an agreement with Brazil's Mineração e Metálicos SA (MMX), to acquire 21.52-per cent stake in the iron ore miner for $400 million.

Through the deal WISCO would become the second-biggest shareholder of MMX, which is controlled by billionaire Eike Batista. In total, MMX will issue about 167.8 million new shares including the rights of the company's minority shareholders, at a price equivalent to $3.93 per share.

WISCO also executed another deal with EBX Investimentos Ltda. (EBX), the holding company of MMX, to construct a steel plant of 5 million tonnes per annum capacity at Port do Acu in southeast Brazil. Wuhan will own 70 per cent stake in the new joint venture while EBX will hold the remaining 30 per cent.

An offtake agreement has also been signed between WISCO and MMX Sudeste, an MMX subsidiary, which provides for the supply of at least 50 per cent of the iron ore production from Serra Azul mines of MMX Sudeste. The contract will be valid for 20 years beginning April 2010.

Rio de Janeiro-based MMX consists of three iron ore mining entities: MMX Corumba and MMX Sudeste in Brazil and Minera MMX in Chile. Logistics operations are managed by another group company LLX Logistica SA.

MMX hopes to obtain funding for the steel plant from China Development Bank and Brazil's development bank BNDES. It is expected that construction of the steel plant would commence by May next year.