Brazil's B&A Set to Announce New Acquisitions in Coming Months

02/01/2013| 11:16am US/Eastern

--Brazil's B&A could announce up to five new investments in the next three months, says firm's chief executive

--B&A's acquisitions could exceed initial investment capital of $520 million

--B&A will create specialized companies for iron ore, copper and fertilizers

By Luciana Magalhaes

SAO PAULO--A Brazilian start-up mining firm with two powerful backers has zeroed in on five new investment targets, as it seeks to complete a first round of investments in iron ore, copper and potash projects.

"We are evaluating opportunities in Africa, Brazil, Chile and Peru," said Eduardo Ledsham, chief executive officer of B&A Mineracao Ltda. In an interview at his office in Sao Paulo, Mr. Ledsham said the company is currently doing the due diligence on five projects and could announce their acquisition in the next three months.

B&A was formed last year out of a partnership between former Vale SA (VALE, VALE5.BR) President Roger Agnelli and Banco BTG Pactual SA, the investment bank controlled by Andre Esteves. The venture combines Mr. Esteves, a well-known dealmaker, with an experienced mining executive who served as Vale's chief executive for a decade until 2011, helping the company's profit soar amid a global commodities boom.

B&A already has investments in three companies, and Mr. Ledsham declined to name the five new assets being looked at. There have been reports that B&A has been selected by BHP Billiton Ltd (BHP, BHP.AU) as the preferred bidder for its 40% stake in large iron-ore deposits in Guinea's Mount Nimba. B&A's CEO declined to confirm the negotiations, while BHP Billiton has also declined to comment on the reports.

So far, B&A's portfolio consists of three companies, all involving pre-operational projects and on which it spent around $100 million. One of the projects, Cuprum Resources Corp., is developing a copper mine in Chile, and would be the first project to begin production, expected in the first quarter of 2014, Mr. Ledsham said. B&A owns Cuprum outright.

The other two, Rio Verde Minerals Development Corp. and MBAC Fertilizer Corp. (MBC.T), are both developing potash projects in Brazil. B&A expects to take over full ownership of Rio Verde Minerals by the beginning of March, once it receives regulatory approvals; MBAC is listed on the Toronto Stock Exchange and B&A owns 11.5% of the stock.

If B&A decides to proceed with investments in all five of the new projects under consideration it would probably exceed its $520 million total capital, and new options will be explored, said Mr. Ledsham, also a former Vale executive.

Fresh capital likely wouldn't be raised until 2014, and could come either from BTG Pactual and Mr. Agnelli's holding company, AGN Participacoes SA, or through partnerships with financial or strategic investors, Mr. Ledsham said. B&A plans to create three operating units, one each for fertilizer, iron ore and copper, he said.

"Those companies would be under B&A and we would bring partners for each of those," he added. Preliminary talks with some potential partners have been held, but the full development of B&A's new business structure will likely be concluded only in the next two to three years, he said. "We are not in a hurry."

B&A selected those three segments because it sees gaps in the market, the CEO said. The 2008 financial crisis saw investments decline, which has affected major and junior mining companies, Mr. Ledsham said, adding that he sees global asset prices as more attractive than two years ago. "The competition has diminished, but the industry is cyclical. This is the time to consolidate the positions and start operations in the high cycle."

B&A will also consider an initial public offering of shares to raise capital, but that would likely only happen in the next three to five years, he said.

Write to Luciana Magalhaes at [email protected]