Anglos Carroll Buys Iron Ore Stake in First Purchase

Anglo American Plc, the world’s second-largest mining company, will pay $1.15 billion for 49 percent of the Brazilian iron-ore project MMX Minas-Rio, the first acquisition by Chief Executive Officer Cynthia Carroll.

Anglo will buy the stake from MMX Mineracao e Metalicos SA, controlled by Brazilian billionaire Eike Batista, and Centennial Asset Mining Fund LLC, the London-based company said today in a statement. MMX, based in Rio, is digging a 53 million metric tons-a-year mine and a port to export the iron ore, according to the statement.

Carroll, appointed on Jan. 1, is narrowing Anglo’s focus from forestry and gold mining to the metals China needs to fuel its economic boom. The company is digging new nickel, coal and copper mines and developing deposits in South Africa through Kumba Iron Ore Ltd. to increase its exposure to iron ore prices, which will increase 9.5 percent to a record this year.

“The market likes the direction Anglo is taking with this acquisition,” David Shapiro, a fund manager at Sasfin Ltd. in Johannesburg said in a telephone interview. “Carroll’s approach is like a breath of fresh air.”

Anglo’s shares rose 6 pence, or 0.2 percent, to 2,734 pence in London, bringing their gain this year to 9.8 percent. The company has a market value of 40.5 billion pounds ($81.2 billion). MMX Mineracao’s stock jumped 7.2 percent at 1:02 p.m. in Rio.

The first phase of the mine in Minas Gerais state, which will yield 26.5 million tons of iron ore a year from the end of 2009, will cost $2.35 billion to develop, Anglo said.

Second Payment

Once the project’s second phase is approved, Anglo will pay Centennial another $600 million, which, along with contributions to the mine’s development cost, will take its stake in both phases to 50 percent, the company said.

Last year, Anglo took control of the iron-ore mines of Pretoria, South Africa-based Kumba Resources Ltd. after they were spun off to form Kumba Iron Ore. The company, in which Anglo has a 65 percent stake, plans to more than double output to 81 million tons by 2015, from 31 million tons last year.

“Iron ore is core to Anglo American’s future growth strategy,” Carroll said in the statement. “This project, together with the planned Kumba expansions, will add significantly to Anglo American’s iron ore production.”

Credit Suisse Group and Banco Itau BBA advised MMX Mineracao and Centennial, while Banco UBS Pactual SA advised Anglo.

Minas Gerais is the source of about half the iron ore mined by Cia Vale do Rio Doce, the world’s biggest producer. Vale, based in Rio de Janeiro, increased iron ore output by 13 percent to 68.2 million tons in the fourth quarter of last year.

Information from: www.bloomberg.com