Even after raising its bid for Brazilian junior mining firm several times, Brazil’s and the world’s biggest iron ore miner, Vale SA, failed in its bid to purchase a majority stake in Paranapanema. Paranapanema is a Brazilian copper refiner and Vale had proposed to acquire a majority of its stake, raising its bid for the major stake proposal severally. However, the bid failed in a share tender, dwindling Vale’s hopes.

When the auction begun, Vale made an offer of 6.30 reals for each common voting share and increased it to a final price of 6.75 reals. The majority stake acquisition in the copper refiner comes as part of Vale’s plans to incorporate multiple revenue streams other than its core operations in iron ore mining, a business for which it is unrivalled globally. After its bid flopped, Vale stated in a market filing that it will seek none of the shares subscribed during the auction. Vale SA is not obliged to purchase the subscribed shares it fails to acquire a majority stake in Paranapanema, according to the terms of the deal.

Vale’s move for Paranapanema was announced back in July at about $1.41 billion. At that time, the iron ore miner had reported that it was keen to takeover all of Paranapanema’s shares, Brazil’s foremost copper refiner.  Currently, Paranapanema holds 36% of the Brazilian market share in that sector.  However, the terms of the agreement were such that the tender would only be legit if Vale won 50% plus one of Paranapanema’s common shares, out of which there are 319,176,942 in circulation. Unfortunately, Vale only managed to attract about 38% of the shares in the tender.

The Brazilian stock exchange suspended Paranapanema shares from trading, last quoted at 6.65 reals and is planning to hold an auction for shareholders keen on selling their shares of the target firm after the original tender collapsed. Vale, which has an annual copper production capacity of 300,000 tons, had sought to acquire Paranapanema to challenge rivals such as Xstrata Plc and Anglo American Plc to become one of the world’s biggest producers of the metal.

Vale Chief Executive Officer Roger Agnelli is working to expand the company’s output with projects in Brazil, Chile and Zambia. Paranapanema’s main shareholders are Banco do Brasil SA pension fund Previ, Brazil’s development bank BNDES, Petroleo Brasileiro SA pension fund Petros, and investment funds managed by Sociedade Socopa Corretora Paulista SA.

6 Sep 2010.