ArcelorMittal buys London Mining Brazil, partners with Adriana on port

ArcelorMittal (MT-N) cut two sizable cheques on the same day for two iron assets in Brazil.

For US$764 million it bought the Brazilian iron subsidiary of London Mining (London Mining Brazil) and for another US$40.5 million it found a way to get more iron out of the country, taking an 80% stake in Adriana Resources‘ (ADI-V) planned port in the city of Mangaratiba, state of Rio de Janeiro.

London Mining’s assets include a mine in Brazil with 84.5 million proven and probable tonnes grading 41.2% Fe and 155.9 million tonnes grading 41.1% in the measured, indicated and inferred categories (numbers compliant to Brazilian standards, not NI-43-101).

The mine is located 65 kilometres west of the city of Belo Horizonte.

ArcelorMittal, which accounts for about 10% of world steel production, says it’s considering dropping $700 million on the project to ramp up production at the mine to 10 million tonnes iron ore concentrate and lump ore a year from the current 1.4 million tonnes.

With ArcelorMittal expanding its iron presence in Brazil, Adriana’s timing couldn’t have been better on planning an iron ore port facility.

The company started collecting property in Mangaratiba this past winter with the aims of developing the facility. Adriana initially bought around 200 acres of land on the bay of Sepetiba, with another 20 pending.

With the property in hand Adriana began engineering and permitting on plans for between a 5 and 10 million tonne a year facility, expandable to 50 million.

But as Adriana put it in a press release, “Given the capital-intensive nature of the project, the company expects that the Port Agreement (with ArcelorMittal) will establish the required funding, technical and regional expertise, and industry recognition to move the project through to completion and revenue generation.”

The agreement gives ArcelorMittal an 80% stake in the port and Adriana the remaining 20%, with costs shared accordingly.

ArcelorMittal will also participate in a $6.45 million non-brokered private placement, which will help Adriana with its share of those costs. The debenture is convertible into common shares at 90 in the first two years and 99 over the next two.

Interest from the debenture, pegged at 7%, will convert according to the same structure.

All told it should give ArcelorMittal about 10% ownership of Adriana. Adriana says that will be followed by another private placement which would bring ArcelorMittal’s stake up to 19.9%.

On news of the acquisitions ArcelorMittal’s share price gained US$2.17 to close at $77.68 and Adriana’s share price jumped 18 to close at 90.