Eurasian Natural Resources Corporation Plc (ENRC), the Kazakh based miner is to expand its presence in Brazil. The firm will remit $670 million for the Brazilian venture, to expand its iron ore business and diversify into Latin America’s biggest emerging market. Brazil is currently Latin America’s largest economy, and the Kazakh miner is hopeful of an increased business offering in the country.

In the deal, ENRC will buy the rest of the BML project in Brazil. Lately, the Kazakh miner, listed on the London Stock Exchange, has aggressively been on an acquisition wave in the last one year. The firm has used its cash reserves for the acquisition of assets, a majority of which have been in Africa, as it builds a broad based mining firm focused on emerging markets. However, even as the Kazakh firm embarks on a Brazilian venture, it reiterated that the BML project is by no means its last takeover.

In an interview with Reuters, ENRC chairman, Johannes Sittard said the firm’s takeover strategy goes beyond the Brazilian undertaking and more investments should be expected from the firm. The deal for the BML takeover was announced Tuesday. According to Sittard, the firm is generating cash flow and the market still looks solid for the previous quarter that will help the firm sustain its cash balance.

With the strong cash flow, there is no reason for suspending additional takeover investments, said Sittard. ENRC will remit $670 million to Swiss group Zamin Ferrous for the 50 per cent of iron developer Bahia Minerals BV that it currently does not own. Other than that, the firm got an option that allows it to purchase an adjoining project for up to $150 million. Bahia's BML project is expected to produce 19.5 million tonnes of iron ore concentrate per year by 2014 at a capital cost of about $2.1 billion, ENRC said.

Analysts noted that the above figures are a strong positive for ENRC as the iron ore project had limited value in the company's portfolio previously, given the fact that port and rail arrangements, permitting and feasibility numbers were pending. ENRC was in talks with steelmakers to possibly sell a stake in the BML project to help finance the cost of building it.

This fresh deal begun with the purchase of half of Bahia stock two years ago for an estimated $306 million by ENRC, but since then an exploration program has identified more resources in the deposit and an updated feasibility study was completed in July.

22 Sep 2010.