Monday March 31, 04:29 PM
Anglo American buys Brazilian iron ore projects for 5.5 billion dollars
By Ben Perry
LONDON (AFP) - Global mining giant Anglo American (LSE: AAL.L - news) on Monday agreed to buy Brazilian iron ore interests for 5.5 billion dollars amid strong demand for steel, particularly from China, and record-high commodity prices.
Anglo American said in a statement that it would take control of the Minas-Rio and Amapa iron ore projects, currently owned by MMX Mineracao e Metalicos SA (MMXM3.SA - news) (MMX) of Brazil, for the equivalent of 3.5 billion euros.
Iron ore is used to make steel, a metal helping to feed construction in emerging economic powers such as China and India.
The Minas-Rio project is under development and is set begin production in the first half of 2010, turning out 26.5 million tonnes of iron ore per year.
The Amapa project became operational in December and has capacity of 6.5 million tonnes.
Anglo American has agreed to buy the mines from MMX by purchasing 63.5 percent of a new company, IronX, which will then be de-merged from MMX.
"Anglo American plc is pleased to announce that ... it has signed an agreement with the controlling shareholder of MMX Mineracao e Metalicos, Mr Eike Batista ... and certain other MMX shareholders to acquire a 63.5 percent shareholding in a new company IronX which will be de-merged from MMX," a statement read.
The global supply of iron ore is dominated by three mining companies, with Brazil's Vale sharing the market with BHP Billiton (LSE: BLT.L - news) and Rio Tinto (Frankfurt: 855018 - news) , the world's second and third-largest iron producers.
BHP Billiton is currently in the midst of a hostile takeover bid for Rio Tinto, while ArcelorMittal (Amsterdam: NSCNL0001MT7.AS - news) is the world's biggest steel producer.
Vale last week said negotiations to acquire its smaller Anglo-Swiss rival Xstrata (LSE: XTA.L - news) had ended unsuccessfully. A deal would have created the world biggest mining group, overtaking BHP Billiton.
As demand for iron ore surges, so too have prices. European steelmakers last month criticised recent moves by producers to hike iron ore prices by a massive 65 percent.
The increase comes amid record-high prices for other key raw materials, such as oil, gold and platinum. A large factor behind soaring prices is the weakness of the dollar, which makes commodities priced in the US unit cheaper for foreign buyers. The raw materials are also seen as a good hedge against inflation.
Official European Union data released Monday showed inflation in countries using the euro surged in March to the highest level since the eurozone was formed in 1999.
The European Union's Eurostat data agency said in a first estimate that 12-month inflation in the eurozone jumped to 3.5 percent in March, up from 3.3 percent in February and slightly above economists' forecasts for 3.4 percent.
The figure, which came amid record oil prices around 110 dollars a barrel, was far above the European Central Bank's comfort zone of just under 2.0 percent.
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