* Company looking at mine sites in Brazil, Chile
* New mines could start between 2016 and 2020
* Projects to take advantage of MMX-EBX ports
* MMX expects loan deal with state-bank this year
(Adds detail of company plans, CEO comment)
By Jeb Blount and Sabrina Lorenzi
RIO DE JANEIRO, May 31 (Reuters) – MMX Minera GBPo e Metais SA
is studying iron ore mining projects in Brazil and
Chile that could expand capacity by at least 50 percent over
planned 2016 levels, its chief executive said on Thu rsday.
The projects, each with the potential for 10 million tonnes
of output a year, are in the Bom Sucesso region of Brazil’s
Minas Gerais state and near Copiap ‘ in northern Chile, MMX CEO
Guilherme Escalh GBPo told the Reuters Latin America Investment
Summit.
If built, the mines would raise MMX’s planned capacity to at
least 58 million tonnes a year by 2020 from 38 million tonnes in
2016 and represent a third phase in an MMX expansion plan
focused on the 4.8 billion real ($2.39 billion) Serra Azul
project.
It will also allow MMX to take advantage of its iron-ore
port near Rio de Janeiro which is being built to handle 50
million tonnes a year but is expandable to 100 million tonnes.
” As the port can handle up to 100 million tons, we’re
looking beyond Serra Azul,” Escalh GBPo said in Rio de Janeiro.
“Bom Sucesso is part of our future potential to increase our own
production of iron-ore.”
The Bom Sucesso project has 360 million tonnes of certified
reserves and would require about 30 to 40 kilometers ( 19 to 25
miles) of railway to link it to the MRS Logistica SA
railway that links Serra Azul to MMX’s Sepetiba Bay port near
Rio, he said.
The project also has attractive transport links, he said.
“The mine in Chile is only 80 kilometers from the coast and
the port, and that’s the main attraction there,” he added. “The
certified reserves are still small, but the research campaign
there was only revived in 2011.”
The port is also owned by Rio de Janeiro’s EBX Group,
Brazilian billionaire Eike Batista’s energy, mining, oil, and
shipbuilding group. MMX was founded by Batista, who is also its
controlling shareholder.
MMX’s immediate focus, though, is on Serra Azul, in the Iron
Quadrangle mining district of Minas Gerais. The mine is under
construction with partners Wuhan Iron and Steel,
China’s No. 3 steelmaker, and SK Group, South
Korea’s largest conglomerate.
Wuhan owns 16 percent of MMX and has contracts to buy 50
percent of MMX output. SK, a major trader of commodities, owns
14 percent of MMX and a contract to buy 14 percent of future
output.
With the bulk of finance for Serra Azul expected from state
development bank BNDES this year, capacity at the
mine is expected to more than quadruple to 2 9 million tonnes a
year by the first quarter of 2014 from about 6 million to nnes in
2011.
MMX also produces about 2 million tonnes a year from a mine
near Corumb ¡, Brazil on the country’s border with Bolivia.
In a second phase, MMX will develop the P GBPo de Vinho mine
which is adjacent to Serra Azul. It will operate the mine for
its owner, Ja panese-Brazilian steelmaker Usiminas
un der a 30-year lease and have the right to receive annually 7
million tonnes of the mine’s 8-million-tonne-a-year output
starting in 2016, he said.
Escalh GBPo said he is not terribly concerned about a decline
in iron-ore prices making his projects uneconomic. MMX could
sustain $80 a tonne iron ore prices, levels 40 percent below
current prices, and still make a profit.
Costs per tonne are estimated to be below $60 and “in the
bottom quartile of costs among world producers,” Escalh GBPo said,
meaning at least 75 percent of producers have higher mining
costs than MMX.
“For the price to drop to $80 a tonne, a lot would have to
happen in the world,” he said. “And if that happened, a lot of
production would disappear from the market helping maintain
prices.”
Iron ore with 62 percent iron content rose 1.73 percent on
Thursday, its biggest one-day gain since February, to $134.80 a
tonne in the Chinese spot market.
Iron ore has fallen about 10 percent since mid April and is
expected to fall more if Greece leaves the euro zone, crimping
world credit and causing global economic growth to slow.
For the next three years at least, Escalh GBPo expects iron-ore
to remain above the $100 to $120 range and probably at about
current levels.
While current levels are more than a quarter below all time
highs, they are more than double prices five years ago.
Prices for MMX ore will also be supported by quality, he
said. Serra Azul ore has an average 66 percent iron content,
four percentage points above the benchmark level for high-grade
ore.
Additional financing for Serra Azul, 75 percent of which
will be financed by debt, is expected to come from the China
Development Bank, Korea’s state development bank and the export
finance arms of governments in Europe, Asia and North America,
Escalh GBPo said.
Work is being carried out using company cash and bridge
loans from Ita ? Unibanco, Brazil’s largest
non-government lender, and Germany’s WestLB, he said.
Formal applications for new loans from BNDES are expected to
be made in the coming weeks, he added.
MMX shares fell 6.35 percent to 6.34 reais in Sao Paulo
trading on Thursday.
($1 = 2.0122 Brazilian reais)
Follow Reuters Summits on Twitter @Reuters_Summit)
(Writing by Jeb Blount; Editing by Phil Berlowitz and
Marguerita Choy)
