Mubadala Development and Trafigura Group, the world’s second-largest metals trader, have signed a US$996 million deal to take over control of a Brazilian iron-ore port from the fallen tycoon Eike Batista.
Mubadala, the strategic investment company of the Abu Dhabi Government, and Impala, a Trafigura subsidiary, will assume 65 per cent control of MMX Porto Sudeste (PortCo), the company that owns the terminal in Itaguaí, in Rio de Janeiro state.
The deal follows recent changes in the terms of an original $2 billion invested by Mubadala in Mr Batista’s Brazilian conglomerate EBX Group in March last year.
It also reflects Mubadala’s faith that value remains in some parts of the former billionaire’s fading business empire.
A reversal in fortunes for Mr Batista means he has been offloading some businesses to help prevent EBX from collapse.
Mubadala and Impala intend to invest $400m in PortCo to help to pay for the completion of the port, due next year.
PortCo will assume about 1.3 billion reais (Dh2.19bn) in debt from MMX’s mining business, an MMX securities filing announced late on Monday. MMX will retain the remaining 35 per cent stake in the company.
Mubadala and the Dutch Trafigura entered exclusive talks towards owning the port last month. That followed Mubadala modifying the terms of its EBX stake in July, turning its initial investment into a loan to the company.
“This is a cashless transaction for Mubadala,” said a source close to the deal. “There’s been a number of redemptions on Mubadala’s initial investment in EBX, and as a result the UAE company has redeemed a substantial proportion of that investment.”
According to Mubadala’s first-half report, released last month, the repayment period will last four years.
“EBX has continued to stay current with its repayment obligations,” the source said.
The completion of the port deal is subject to regulatory approval and the ratification of a debt restructuring agreement between MMX and its lenders, according to a separate statement from Mubadala and Impala.
The deal is expected to be completed before the end of the year.
A major iron-ore port terminal, Sudeste is designed to handle large “cape-size” vessels and has an initial capacity to handle 50 million tonnes of iron ore per year, according to the statement. There were plans to raise that capacity to 100 million tonnes a year, it said.
Construction work on the huge port began in July 2010 and commercial operations are slated to start in the middle of next year.
Brazil is one of the world’s largest iron-ore producers, exporting 234.4 million tonnes of the material in the first nine months of the year, according to the country’s development and trade ministry.
Prices of iron ore gained 12 per cent in the three months ending last month to an average of $132.55 a tonne, spurred by China refilling stockpiles.
Mubadala has already secured a foothold in the supply chain of other raw materials around the world. Last November, it signed a bauxite supply agreement with Guinea that will allow a state-backed miner in the African country to increase production by a third.
Mubadala announced last month a more than 10 per cent rise in first-half profits to Dh1.1bn, results that did not reflect changes to its EBX investment.
Missed production targets have caused a sharp fall in the valuation of companies under the umbrella of EBX, which was worth as much as $60bn at the start of last year.