ore giant to purchase australian

Ore giant to purchase Australian

BRAZIL'S CVRD has launched a major push into the Australian market just weeks after overtaking Rio Tinto to rank as the world's second-largest mining company.

The rapidly expanding Brazilian iron ore giant yesterday said it would acquire privately owned coal producer AMCI Australia for $835 million to help diversify its product mix.

Senior CVRD executives told analysts they were likely to consider additional Australian purchases.

"Australia is a country that has been on CVRD's radar for some time now, because it is a geological terrain that is very similar to the Brazilian one," CVRD non-ferrous minerals head Jose Lancaster said. He added that Australia had lots of iron ore and uranium, so it "makes sense that we conduct research in that country".

The AMCI acquisition represents CVRD's first major push into Australia, although in 2005 the company signed a deal with AMCI and Aquila Resources to study the Belvedere coking coal project in Queensland.

It has also picked up interests in local projects and companies such as Heron Resources, through its $US16.8 billion ($A21 billion) purchase of Canadian nickel producer Inco last year. That deal propelled CVRD into the same league as rivals BHP Billiton, Rio Tinto, Anglo American and Xstrata.

CVRD's move came just days after former BHP Billiton chief executive Brian Gilbertson formed a private equity consortium that includes US-based AMCI to make a tilt at Perth miner Consolidated Minerals. Some analysts had speculated AMCI's Australian coal assets might eventually be folded into ConsMins. AMCI Australia, with headquarters in Brisbane, produces 8 million tonnes of predominantly coking coal a year at open-cut and underground mines in the Hunter Valley and the Bowen Basin.

"The deal complements CVRD's overarching strategy of providing a complete suite of steel-making raw materials," Macquarie Equities global resources analyst Sophie Spartalis said. "(It) provides a platform for CVRD to further launch its coal growth strategy."

CVRD business development director Pedro Jose Rodrigues noted his company was also interested in AMCI's 7000 square kilometres of exploration assets, which could contain 3 billion tonnes of coal resources.

"The production numbers for AMCI are not so great," he said. "The important fact is we are entering a major basin (Bowen) where all the major producers of coking coal are present. This is a strategic position we have entered, with all our competitors aiming at expanding their businesses more."
KEY POINTS
■CVRD will pay $835 million for coal producer AMCI Australia.

■AMCI has mines in the Hunter Valley and the Bowen Basin.

■The AMCI acquisition is strategic, says CVRD.