References

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Australian Mining firm Riviera Resources plan acquisition of Brazil's South American Ferro Metals subsidiary

Riviera Resources, an ASX-listed company, said today that it had completed due diligence study for the acquisition of the Brazilian subsidiary of South American Ferro Metals (SAFM), which owns mineral exploration permits in southern Brazil. The company on Thursday announced that it would now seek shareholder approval for the intended investment plans.  

 

Back in March, Riviera signed a deal with SAFM to acquire 100% of SAFM’s Brazilian subsidiary and all its mineral rights over the Ponte Verde property that has an exploration plan of around 140 to 150 million tons of Haematite-rich Itabirite, grading 39%. The Itabirite is not a magnetite and therefore is easily and economically upgraded to 60+ Iron content.  Additionally, the investment acquisition would also involve the taking over of the existing plant that had a capacity of 1.8 million tons per annum.

 

Riviera aims at starting the Ponte Verde production this year and it said that the initial production capacity of about 1 million tons per annum would offer the company a strong operating margin and thus creates room for potential upgrades in the future (up to 5 million tons yearly). Riviera expects the initial production from the Ponte Verde investment Project to be sold to local Brazilian steel mills or large producers like Vale.

 

Under the executed Heads of Agreement (HOA) with SAFM, Riviera said that a notice of meeting is expected to be sent to shareholders for approval with the transaction to be finalized in July this year. Riviera managing director, Philip Re, said that the company will be one of the few ASX listed companies offering exposure to the growing iron ore industry in Brazil.

 

Given the well established Brazilian iron ore industry, the company said that it believes it has the potential to develop vital shareholder value with the SAFM iron ore project.  It said that consideration has to be paid to its shares based on three performance milestones and as such, no cash considerations is required.

 

The company added that there was no shortage for their product in Brazil both from the domestic and foreign market with the country’s growing and well performing economy and the production is expected to begin late this year with strong operating margins.  The project, according to Riviera, will be managed by the domestic and more experienced SAFM management team in Brazil with an expected further drilling programme that is anticipated to begin upon completion of the transaction.

June 4, 2010.