Vale announced in late July 2010 it would offer to buy up to 100% of the common shares of Paranapanema S.A., subject to the purchase of at least 50% plus one common shares. Paranapanema is Brazil’s leading producer of refined copper, with assets that include a copper smelter/refinery and three plants that produce semi-finished copper products. It also has a 99.09% stake in Cibrafértil, which operates a phosphate fertilizer plant. The cash offer was scheduled to be made on September 1, 2010, and valued Paranapanema at just over R$2 billion ($1.1 billion).
The Paranapanema copper smelter/refinery is located in the industrial district of Camaçari, Bahia state, and is Brazil’s only producer of LME certified copper cathodes. It has current capacity to produce 220,000 mt/y of cathodes and has an expansion project in progress to increase capacity to 277,000 mt/y.
The three semi-finished copper products plants have capacity to produce 78,000 mt/y of copper sheet, bars, tubes, fittings and other copper alloys. Two of the plants are located in the state of São Paulo, and the other is in Espírito Santo.
Cibrafértil is located in Bahia and is connected to the Paranapanema smelter by pipelines. It has a production capacity of 306,000 mt/y of single superphosphate.
Vale said if its offer is successful, it will conduct studies that could result in reorganization of Paranapanema and/or its assets.
In the statement announcing its bid for Paranapanema, Vale said one of its medium-term strategic objectives is to become a leading world copper producer. Vale currently has combined production capacity of 300,000 mt/y copper in concentrates produced at its Sossego mine, in Carajás, Brazil, and copper produced as a nickel byproduct at Sudbury and Voisey’s Bay, Canada.
Vale is currently developing two copper projects, Salobo, in Carajás, with production capacity of 100,000 mt/y, and Três Valles, in Chile, with production capacity of 18,000 mt/y, with start-ups scheduled for 2011 and 2010, respectively. Development of the Konkola North project, in Zambia, with capacity of 40,000 mt/y, will start this year. The company also has several less-advanced copper projects.
The Paranapanema acquisition will enable Vale to develop copper projects that contain certain contaminants, the Vale statement said: “The smelter adjustment to process these concentrates is feasible from a technical and economic point of view and will improve the economic conditions for the treatment of these concentrates, thereby enabling the faster production expansion of Vale’s metals over the next years.”
