Nov. 11 (Bloomberg) -- Ferrous Resources do Brasil Ltda., a mining company seeking to fund an iron ore complex, wants to raise $2.7 billion through a combination of debt, an initial public offering and investment from a strategic partner. Ferrous intends to borrow about $1.3 billion, Bob Graham, a director of the closely held, Belo Horizonte, Brazil-based ... (continue here)
company, said in an interview. Ferrous is talking to companies about investment in the Viga and Serrinha projects in Minas Gerais state in return for iron ore supplies, he said.
“We’re talking to a number of potential strategic investors and we’re looking at coming to the public market at some point,” Graham said.
Ferrous plans to join Rio de Janeiro-based Vale SA, the world’s largest iron ore supplier, in mining the steelmaking material from Brazil as prices climb. London-based Anglo American Plc is developing the $3.6 billion Minas-Rio project in Minas Gerais, for which it has said it may seek partners.
Ferrous will use some of the funds it plans to raise to build a port and a 400-kilometer (249-mile) pipeline, which will carry raw material contained in a slurry from the mining complex to the coast, Graham said Nov. 9 by telephone from his home in Yorkshire, England. Graham was previously head of Rio Tinto Group’s Brazilian unit.
Ferrous planned an IPO in London last year, Graham said, before commodity prices slumped amid the global economic slowdown. The company has retained JPMorgan Cazenove Ltd. as an adviser, he said.
Private Placements
“It’s likely to be a mix of 50-50 debt and equity, but how much of the equity comes from the IPO and how much from the strategic investor is still being decided,” Graham said. He said no schedule has been set for the IPO and declined to identify the companies Ferrous is talking to.
The company was established in 2007 and raised $1.26 billion via private placements between June 2007 and August 2008, according to its Web site. The largest investor in Ferrous is Harbinger Capital Partners, the New York-based hedge fund firm run by Philip Falcone, Graham said. Ferrous has enough funds for feasibility and engineering studies, he added.
Viga and Serrinha will produce 25 million metric tons a year of iron ore. Construction of phase one of the complex is scheduled to begin in 2011 with first production due before the end of 2013, Graham said. The location of the port has space for an iron-ore pellet plant and steel mill, for which permits are being sought, he added. A second phase could double output to 50 million tons.
Demand Rebound
Ferrous is seeking government approval for its infrastructure projects, Graham said.
Iron ore demand is rebounding after the financial crisis and sales are expected to expand next year, Vale Chief Executive Officer Roger Agnelli said last week. Vale, Rio and BHP Billiton Ltd., the three-largest producers, are boosting shipments from mines in Brazil and Australia as steel mills in Asia, Europe and the U.S. restart furnaces to meet demand from automakers and builders.
Contract prices may jump 14 percent next year to the second-highest on record, according to a Bloomberg News survey of analysts last month.
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