High iron ore prices draw powerful outsiders
In a new cycle of strong growth, iron ore prices have attracted two major economic groups to the industry. The holding company J&F — owner of the giant meatpacker JBS — unveiled the purchase of mining company Vale’s assets in Corumbá, Mato Grosso, earlier this month. In August, Cosan, owned by businessman Rubens Ometto Silveira Mello, debuted in mining by buy buying the port of São Luís, Maranhão, with plans to bring ore from Pará.Although these are still modest mining projects, the two giants are willing to make multibillion investments for this new business division to become relevant for the groups’ revenues, sources say.J&F’s plans are not restricted to keeping the two mines recently acquired from Vale, with a capacity of 2.7 million tonnes that may be expanded to 6 million tonnes. After buying the mines, J&F mulls new opportunities in the industry, aa source familiar with the group said. "This was the first step," the source, who spoke on condition of anonymity, said.Just as it did in the animal protein industry, J&F plans to be a relevant player and build the "JBS of mining," the source added. Acquisitions have been a regular strategy of the Batista family to advance in the markets in which they are interested in.Vale confirmed the sale of the mines to J&F, as Valor reported two weeks ago. The deal valued the assets at $1.2 billion by the enterprise value. Considering this EV and the EBITDA of $110 million, the transaction boasts an "attractive" multiple of 10.9 times for Vale, according to Bank of America.For analysts Caio Ribeiro, Leonardo Neratika and Guilherme Rosito, the sale shows the mining company’s commitment to "enhance and simplify its portfolio and focus on high quality assets." Compared to Vale’s other operations, the Central-West system represents a lower-quality asset, with EBITDA per tonne of iron ore of $41, compared to the company’s average of $102 per tonne, they noted.In J&F’s view, however, the deal was not expensive, another source said. A good part of the $1.2 billion attributed to the assets refers to take-or-pay contracts signed with Hidrovias do Brasil until 2039. Therefore, the amount the Batistas will have to disburse effectively will be $150 million, and the debts of the operation total R$1 billion, well below the enterprise value. By closing the deal, J&F indicates that it sees room to increase gains in the operation, which could include expanding production, it said.J&F decided to enter mining because it...
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