the incredible smelter mystery :)

Been doing some interesting reading on Brazil's only big copper smelter, Paranapanema. As a result of conversations at the AGM and earlier meetings, these are I suspect the smelters who AVB have been negotiating with. Their website June 2012 Quarterly makes for interesting reading. As does the company overview http://www.paranapanema.com.br/RI/eng/download/Presentation_Market_10082011.pdf

Paranapanema has been working on major expansion for some time and much of their increased capacity will come on line around the time Stage 1 Antas North mine will start operating. Fortuitous coincidence or good mutual planning? One of the expansion projects... "The company continues to execute the environmental studies and surveying for the new plant of hot-rolled copper products in São Mateus (ES) which will have an installed capacity of up to 200,000 tons per year. The construction works are due to begin in 2013. The municipal administration of São Mateus has completed the donation of an area with 399,000 m² in the industrial district of the municipality for the installation of this new production unit;" (June 2012 Quarterly p.24) Other expansion projects are happening as well, please read these two referenced items.
The importance of these smelters to AVB's way forward has been mentioned at more than one AVB meeting. Paranapanema are investing heavily in logistics to get concentrate to the smelter. They are located in Para state along with AVB. Paranapanema have been stating since at least August 2011 that they are looking for partners to provide concentrate and, interestingly, also take over some leases they own. Paranapanema are creating jobs, paying taxes etc in Brazil but it appears Vale are exporting a quantity of their concentrate which may not be viewed as favourably by the Brazilian government? (Starlines posts from yesterday highlighted some of the turmoil inside Vale as a consequence of shakeups over there and provided some good links. I do wonder if TN negotiations are being impacted by all this, in fact I would be surprised if they weren't. The politics could be de-stabilising).
The Brazilian government is effectively in a currency war with the US etc and prepared to devalue the Real to maintain growth, profitability etc. Google this issue if interested, there has been a lot of press in the past months. It does highlight the government's willingness to look after its own interests. Brazil has a local producer bias/incentive. I think AVB would be viewed as "good guys" creating revenue and jobs for Brazil.
" The Brazilian Government appears committed in maintaining the Brazilian Real/US Dollar exchange rate close to current trading range. This has a positive impact on Paranapanema´s profitability, reduces the competitiveness of imported copper products and contributes to increase competitiveness of a number of strategically important customers, who had also been adversely impacted by the strength of the Brazilian Real over the past recent years;" (June 2012 Quarterly p.24)
Paranapanema is expecting increased market share (already dominant share) and increased profitability due to the above changes. "Paranapanema has been reassessing its sales strategies in face of the possible impact from the Federal Senate Resolution No. 13 of April 26, 2012 which will reduce the tax incentives currently granted to competing imported products. This resolution will become effective on January 1, 2013 and if the provisions included there are fully implemented as originally intended it by the legislators the new legislation could favor substantially Paranapanema’s business next year" (p.24)
There is a lot more info in these articles but perhaps the most interesting is the following:
"The company continues to make progress with the procedures for setting up strategic partnerships with local mining companies aiming at exploiting small and medium-scale reserves of copper, thus ensuring alternative sources of supply at lower cost and allowing Paranapanema also to participate in this segment of the copper production/value chain;" (p.24)
Given the information given at the AGM last week; the size of AVB land holdings on a comparative basis, the richness revealed by the mag maps, the advanced soil/chem programs, AVB preparedness to mine and the fact that MW has said we will receive feedback on mine financing/off take agreements within "...a month or two..." I would be incredibly surprised if AVB were not making some new announcements that might put us all a lot more firmly in the picture when the negotiations are completed.
There is a lot more to be gleaned from the smelter's website but I wanted to share the task of trolling for the catch :) Rome wasn't built in a day but I'm glad that with my AVB share holding I own a column in the colosseum.