RIO DE JANEIRO -(Dow Jones)- Brazilian steelmaker Companhia Siderurgica de Nacional SA (SID, CSNA3.BR), or CSN, has abandoned plans to merge its iron ore ventures in Brazil after two Japanese partners pulled out of one of them.
CSN said it has stopped negotiating the merger of its major Casa de Pedra mine with its Nacional de Minerios, or Namisa, mine assets and trading operation, as no accord on a merger was reached with partners. The company is now preparing a new business plan for Namisa's expansion, with revised dates and investment levels, which should be announced in the third or fourth quarter, a CSN director said on a conference call with analysts Wednesday.
CSN said two years ago that it planned to merge Casa de Pedra and Namisa and spin them off as a separate company in an initial public offering, in an effort to maximize the value of the assets amid strong global demand for iron ore, the key steelmaking ingredient. Since then, prices for the commodity have reached record highs on China-led demand. CSN sold off a minority stake to a group of Asian investors in Namisa in 2008.
One month ago, two of Namisa's Japanese partners, Nippon Steel (NISTY, 5401.TO) and Sumitomo Group, decided to sell their stakes in the iron ore company to the South Korean and Japanese partners who remained in the venture.
Nippon and Sumitomo quit as they didn't agree to the review of the Namisa development plan which is now underway, CSN mining director Ricardo Abramof said on the call.
"The expansion of Namisa is under discussion with the partners," Abramof said. "Namisa will produce 39 million tons a year of iron ore with some third-party purchases, and the capex is being discussed."
CSN plans to sell a total of 31 million metric tons of iron ore in 2011. The company is currently spending 4.2 billion Brazilian reais ($2.69 billion) on expanding Casa de Pedra to a production capacity of 50 million tons a year by 2015 and BRL2.5 billion to expand its port at Itaguai to handle 84 million tons a year, from both Casa de Pedra and Namisa, by 2014, Abramof said.
Casa de Pedra and Namisa are both located in Minas Gerais state in southeast Brazil. Itaguai is located in Rio de Janeiro state. CSN plans to build two pelletizing plants in Minas Gerais to process ore from its mines.
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