Bloomberg News

Zamin Plans to Sell as Much as 49% of $3 Billion Ore Project

June 17, 2011

June 17 (Bloomberg) -- Zamin Ferrous Ltd., the mining company that is developing what would be Uruguay’s largest investment, is talking to possible partners to sell as much as 49 percent of the $3 billion Valentines project before November.

Closely held Zamin is in negotiations with steel and mining companies from China, the Middle East and the Americas and expects to reach a deal “in two to four months,” said Martin Kannengieser, head of business development of the Jersey-based company. NM Rothschild & Sons Ltd. is advising on the deal, he said, declining to comment on possible valuations.

“Our plan is to bring a partner who would help both with the equity for the project as well as helping to support the debt,” Kannengieser said in a telephone interview from London yesterday. “Zamin will retain control of the project.”

Mining companies are accelerating plans to develop iron-ore deposits from Brazil to Australia as prices have more than doubled in the past two years, boosted by increased consumption by China. Rio Tinto Group, the world’s second-biggest mining company, said on June 15 it will spend $676 million to speed an expansion of its Australian iron-ore operations by six months.

Zamin’s Valentines project involves the development of a 2.1 billion-metric ton iron-ore mine located about 250 kilometers (155 miles) north of Montevideo, with a targeted initial output of 18 million metric ton per year. The project, scheduled to start production in the first quarter of 2014, includes the construction of a so-called slurry pipeline for 215 kilometers to a new port for exporting the iron ore.

Debt Discussions

Zamin aims to complete the feasibility study for the project next month and expects the license from the government by the first quarter of 2012 before starting construction, said Kannengieser, 49.

“We are getting very good attention and support from the government,” he said.

The Valentines project would require about $2 billion in debt and Zamin is in discussions with export credit agencies in countries including China, Brazil, Canada and Australia, Kannengieser said. Zamin is also studying a further expansion of the project to double its output capacity as potential resources may exceed 5 billion tons, he said.

Prior to Valentines, Zamin developed Bamin, an iron-ore project in the Brazilian state of Bahia, before selling it to Eurasian Natural Resources Corp. in two stages for about $1.04 billion.

--With assistance from Lucia Baldomir in Montevideo. Editors: Robin Saponar, Dale Crofts

To contact the reporter on this story: Juan Pablo Spinetto in Rio de Janeiro at jspinetto@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net


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