Vale to Sell $12.8 Billion Shares in Brazil, Abroad
July 3, 2008
July 3rd (Bloomberg) – Cia. Vale do Rio Doce, the Brazilian mining company that is seeking new acquisitions after a bid for Xstrata Plc collapsed this year, filed to sell as much as 421.3 million shares in Brazil and abroad, valued at $12.8 billion.
The sale of up to 256.9 million common shares and 164.4 million preferred shares will take place as soon as tomorrow, Rio de Janeiro-based Vale said today in a statement. The shares are worth 20.5 billion reais ($12.8 billion), based on yesterday’s closing price in Sao Paulo.
Vale said June 10 it planned to sell as much as $15 billion of stock to fund expansion and possible acquisitions. The Rio de Janeiro-based company abandoned a $90 billion bid for Xstrata in March that would have made it the world’s biggest miner.
Credit Suisse Securities LLC will manage the sale, in which international investors may opt to receive American depositary receipts, Vale said. Vale will apply to list its ADRs on the Paris-based Euronext exchange.
Vale preferred shares rose 35 centavos, or 0.8 percent, to 43.75 reais at 10:29 a.m. in Sao Paulo. Common shares fell 6 centavos, or 0.1 percent, to 52.13 reais.
Cleveland Cliffs Gains After Raising Iron-Ore Prices
June 30, 2008
June 30th (Bloomberg) – Cleveland-Cliffs Inc., North America’s largest producer of iron-ore pellets, rose to a record in New York after Deutsche Bank said the company’s price increases will boost earnings.
Cleveland-Cliffs gained $7.87, or 7.1 percent, to $119.19 at 4:01 p.m. on the New York Stock Exchange. The shares earlier touched $121.95, the highest ever, and have tripled in the past year.
Portman Ltd., the Cliffs-controlled unit that’s Australia’s third-largest iron-ore mining company, said June 27 it will charge Chinese customers as much as 97 percent more for iron ore next year. The price increases follow competitor Rio Tinto Group’s iron-ore price settlement with Chinese steelmakers.
“We are upping our 12-month price target for Cleveland- Cliffs to $150 a share from $115 following significant revisions to our estimates for Cliffs’ realization prices for both iron ore and coal,” Deutsche Bank analyst Ted Tabasso wrote today in a note to investors. Tabasso reiterated his “buy” recommendation and increased his estimate of 2008 earnings to $6.69 a share from $5.77.
Cliffs supplies about 28 percent of the iron-ore pellets used in North America. Much of the iron ore it doesn’t supply is held by producers such as U.S. Steel Corp., the largest U.S.-based steel company. Benchmark prices traditionally are set for the 12 months starting April 1 after talks between steel mills and major suppliers such as Rio Tinto and BHP Billiton Ltd..
Cliffs’ contracts with customers in North America are based on a formula that includes the world price, steel prices and inflation indicators, while those from its mines in Australia follow the negotiations by Rio Tinto with Chinese steelmakers.
June 23rd (The Birmingham Post) – If your hopes for a decent pension and prosperous old age rely on a FTSE 100 tracker fund, you’d better start keeping tabs on a hitherto little known outfit called Ferrexpo.
Ferrexpo is a Ukrainian iron ore miner among four companies that took their place in the blue chip index on Monday after the latest quarterly reshuffle.
Out went familiar and home-grown Alliance & Leicester, Home Retail Group, Persimmon (the housebuilder) and Tate & Lyle. In came Drax, the power station operator, Petrofac, oil and gas services specialist, Invensys, an engineer descended from the old Birmingham Tyre & Rubber, and Ferrexpo.
The latter’s inclusion is, in one respect, nothing more than a reflection of the increasingly global nature of equity markets. It is also a sign of the eastward shift in economic power.
Not to mention, some would argue, a potentially dangerous over-weighting of commodity stocks in the “Footsie”.
Cynics would add that Ferrexpo’s arrival is nothing more than a liking on the part of eastern European companies for the lighter regulatory regime that London offers.
That’s not a view that this column shares. To begin with, the Ukraine, which won its independence when the Soviet Union broke up in 1991, is, despite its perceived political weaknesses, nowhere near as dangerous a place for businessmen as its neighbour Russia appears to be.
Second, Ferrexpo is largely headquartered in Switzerland and has Mike Oppenheimer of the famous South African diamond mining dynasty as its chief executive.
He was yesterday quoted as saying of the Ukraine: “This is not Russia. The government does not intervene … there is very little direct intervention in the business from Kiev.” Ferrexpo came to the market only last year. But since then its share price has nearly trebled from 150p to the 430p market, thanks to the boom in demand for iron ore.
So far so good. The downside to the arrival of companies like Ferrexpo and others in the sector (Mexican silver miner Fresnillo is knocking on the Footsie’s door) is that oil (especially oil) and commodities stocks are now beginning to assume the appearance of a bubble.
And, of course, it is not just tracker funds that are going to be exposed to a potential implosion similar to that that wiped out so many when the dotcom boom ended.
Active fund managers are bound to be piling in as well.
If you trust your fund manager to spot a looming bust, then sit back and take the value while it’s there. Needless to say, not many of us have that much faith in so-called experts, some of whom can’t see Christmas coming.
One investment commentator wrote at the weekend: “If I were you, I would check if my UK fund manager has been taking big bets on oil – as many of the top performers have.”
The risk that those who have piled into oil big time recently face is the scrapping of fuel subsidies in some countries is going to put a cap on prices.
At least that would wipe the smirks off the faces of speculators who seem hell bent on talking crude up to a crippling $200 a barrel.
June 20th (Bloomberg) – Cleveland-Cliffs Inc., North America’s largest iron-ore producer, plans to take full control of its Portman Ltd. unit in Australia after a share buyback boosts its stake in the business to 89 percent.
Buying out the remaining 11 percent of Portman, Australia’s third-largest iron-ore producer, would cost “several hundred million” dollars and could be financed this year, Chief Executive Officer Joseph Carrabba and Chief Financial Officer Laurie Brlas said yesterday in an interview at the company’s headquarters in Cleveland.
Portman, with a market value of A$3.03 billion ($2.88 billion), trails only Rio Tinto Group and BHP Billiton Ltd. in iron-ore output in Australia and ships about 8 million tons a year. The company last month offered to buy back as many as 16.5 million shares, or 9.4 percent of the stock, which would raise Cliffs’ stake in the remaining shares to 89 percent from 80 percent.
“If all the shares are tendered that are authorized, the pie shrinks and by default our ownership moves up to 89 percent,” Brlas said. “It isn’t in anyone’s best interest for that 11 percent to be indefinitely out there traded,” she said.
Iron-ore prices have gained by a record amount this year. Cia. Vale do Rio Doce is charging Asian steelmakers about 65 percent more, and BHP and Rio are seeking to boost prices by even more. Cliffs said it expects to know the results of the Portman share repurchase by July 2.
Portman fell 44 cents, or 2.5 percent, to A$17.26 in Australian Stock Exchange trading today and has gained 64 percent this year. Cliffs rose 24 cents to $105.74 as of 12:17 p.m. on the New York Stock Exchange. The shares have more than doubled this year.
Time Frame
Carrabba and Brlas didn’t give a precise time frame for when they would buy the remaining stake.
Cliffs said it paid about $500 million, including debt, in 2005 to boost its stake in Portman to about 80 percent, short of the 90 percent threshold that would have allowed it to compulsorily buy the whole company.
“There are scenarios that this year we would have the cash to easily finance it,” Brlas said of the stake. “Obviously, we want to be cautious there isn’t a shareholder who decides to hold us hostage if we say, `At any cost we’re going to finish this.”’
Broker snap: Higher iron ore prices to boost ENRC
June 16, 2008
June 16th (ShareCast) – Higher price estimates for ferrochrome and iron ore pellets prompted ABN Amro to upgrade its rating on Kazakh miner Eurasian Natural Resources Corporation to ‘buy’ from ‘hold’ and increase its price target to 1,650p from 1,300p.
The broker raised estimates for the price of high carbon ferrochrome by 5% for the second half of 2008, by 30% for 2009 and by 25% for 2010.
Its 2008 iron ore pellet price estimate is now 85% higher than that for the previous year.
Foreign miner joins FTSE 100
June 8, 2008
June 7th (The Telegraph) – The colonisation of the FTSE 100 by foreign resources companies will continue this week when Ferrexpo, the Ukrainian iron ore producer, is catapulted into the blue chip index.
A market capitalisation of around £2.68bn will place it at around 80th in the rankings of the largest UK companies. It is likely to be joined by Invensys, which is valued at £2.59bn and is making a remarkable return to the top flight after a near-collapse.
However, two of the biggest London share offerings this year are not eligible for inclusion in the index. Trading in Fresnillo, the Mexican silver miner valued at £3.97bn, has only been possible for 19 days, rather than the necessary 20 so it must wait until the next quarterly reshuffle in September to be included.
Czech coal miner New World Resources, would easily make the index in terms of size – it is valued at £4.59bn – but is disqualified as it is incorporated in the Netherlands.
