Category: Brazil

South African miner AngloGold Ashanti says it will purchase Sao Bento Gold, owner of Brazilian mining company São Bento Mineracao, for $70m. The transaction will be settled by the issue of AngloGold shares to Sao Bento’s current owner, Eldorado Gold, AngloGold says. Sao Bento controls a Brazilian gold operation close to AngloGold’s proposed Corrego do Sitio mine, in the state of Minas Gerais.

Brazilian oil and gas startup OGX, which went public in June, has chosen Houston-based Diamond Offshore Drilling to lease 2 existing offshore drilling rigs. The semi-submersible rigs, called Ocean Ambassador and Ocean Lexington, will each be chartered for 3 years. OGX has been in discussion with Queiroz Galvao for a similar deal, but terminated talks on reaching agreement with Diamond. OGX says it is looking to contract up to two additional ships, and that exploration of the offshore blocks it won in a December government auction will begin in H2 2009. The charter will be financed with OGX’s own resources from its $3.4bn IPO in June. The stock is down 32% since launch, closing at BRL770 Friday.

Brazil’s Parana Banco has closed books on a $35m bond issue, an offer that had originally been set for $100m and was cut to $50m mid-July. The 2010 notes with a 7.750% coupon priced at 99.717 to yield 7.875%, in line with guidance given at the conclusion of a June roadshow. Amid increasingly challenging market conditions, demand reached only $35m, with a few orders still coming in after books closed, according to an official familiar with the transaction. Subscription came mostly from European institutional investors. Queluz Securities managed the sale.

JBS has launched a consent solicitation to modify indentures on $275m in 9.375% of 2011 bonds and $300m in 10.50% of 2016 bonds. The Brazilian beef producer is paying $25 per $1,000 to holders of the 2011 and $40 per $1,000 to holders of 2016s, in an offer launched Friday that expires August 13. JBS has become the world’s largest beef exporter through international acquisitions and the offer is part of a move to reorganize the debt structure to better suit incorporation of international assets. ING, Santander and UBS are managing the operation.

Stephen Everhart has left the Overseas Private Investment Corporation (OPIC) to teach project finance and risk management at the American University in Cairo (AUC). After tours in Brazil, Mexico, and Venezuela with the World Bank and IFC, he took over as OPIC MD in 2002. While at OPIC, Everhart led initiatives to boost CAFTA-DR exposure and build out an education portfolio.

The World Bank has approved its biggest ever loan to a sub-national, a $1.1bn loan for the Brazilian state of Rio Grande do Sul. The 30-year development policy loan starts with a $650m tranche and disburses an extra $450m on completion of certain conditions in the agreement, expected by 2009. The World Bank declines to state the rate. Proceeds will be used to restructure part of the state’s debt and smooth out its debt servicing profile, as part of a fiscal sustainability program. Rio Grande do Sul suffers one of the worst fiscal and debt profiles in Brazil, in which debt is 2x revenue, according to the lender.

Brazilian rental car provider Localiza is evaluating its options for debt raising, IR director Silvio Guerra tells LatinFinance. “At this point we don’t want to issue more equity,” he says, explaining that debt is the cheaper option, and the company is only about 1.3x levered. Localiza completed a non-deal road show in Europe with Goldman Sachs last week to meet existing equity investors. It also met investors in New York this week. Its board this month authorized raising up to $500m in the international or domestic capital markets.

S&P has raised the credit rating of Brazilian miner Vale to BBB+ from BBB, on stronger liquidity following its $11.56bn equity follow-on. The offering “adds to the company’s liquidity and improves its ability to handle its aggressive capital expenditure program,” the agency adds. S&P expects strong iron ore prices and profitability in other metals to enhance Vale’s cashflow in the next 2 years. It expects credit metrics to remain stable, despite possible merger transactions and aggressive capex targets for 2008 and 2009. Vale had been on review for an upgrade since June 16. Its Vale Inco unit was also raised to BBB+ from BBB.

Despite Brazil’s improved fundamentals and investment grade ratings, inflation pressures and global economic trends mean its economy could be in for a tricky time over the next year, characterized by continued interest rate hikes. “My bet is that the Brazilian Central Bank is nowhere near the end of the rate hike cycle,” Gray Newman, senior LatAm economist at Morgan Stanley, told a Brazilian-American Chamber of Commerce event in New York. His shop sees an interest rate peak of 14.25%, from 13.00%, on the back of high commodity prices, that will boost Brazilians’ purchasing power, adding to inflation pressures. If the currency continues to strengthen, Newman says, many non-commodity producers should also see vulnerability from a balance of payment perspective. Morgan Stanley sees the BRL ending 2008 at 1.70 to the USD, versus BRL1.57 Tuesday.

UK based mining company Rio Tinto is planning to invest $2.5bn in a major expansion of its Corumba iron ore mine in Brazil. The work will boost mine capacity to 12.8m tons from 2m tons, Rio Tinto says, with new production expected to start in Q4 2010. The Corumba investment brings to nearly $11bn the total capex Rio Tinto has committed since 2003 to develop its iron ore business, the company states. Rio Tinto will also undertake a feasibility study, to be completed by mid 2009, for a phase II expansion that would take capacity to 23.2m tons per year, the company adds. The expansion of Corumba is designed to capitalize on increased demand for iron ore in South America and the Middle East.