Analysts Smile on Namisa Sale

Mining analysts applaud CSN’s sale of a 40% stake in its integrated iron ore mining complex Namisa to a Japanese-led consortium. The $3.12bn deal values all of Namisa, which can produce 38m tons of iron ore, at $7.8bn. That also implies that the 40m-50m tons that will be produced at Casa de Pedra, CSN’s main iron ore asset, are worth $8.2bn, bringing the total value CSN’s iron assets to $16.0bn, according to UBS Pactual. “We think CSN created value for shareholders,” notes the shop, adding that $16.0bn is double CSN’s current market cap. Itau’s Marcelo Brisac says the sale came at a premium to recent iron ore asset sales in Brazil. In a report he notes Namisa’s enterprise value per ton is $174, which excludes the asset’s main port, its stake in logistics unit MRS, as well as capex required to meet terms of the sale. UBS’s estimate of Namisa’s EV/ton is $205, but the calculation does not exclude those items. Usiminas’ purchase of J.Mendes in February came at $98 per ton, while London Mining’s August sale to Arcelor went for $151, calculates Brisac, noting those two were done under much more favorable market conditions. While the transaction seems to reaffirm many analysts’ previous valuations of CSN, the fact that it converts part of this valuation – $3bn, to be exact – into cash bolsters the company’s case for a higher stock price – a plea it has made repeatedly in recent years. Itau says its fair value estimate for the company is not changed by the deal and maintains its underperform recommendation for the stock with a 2009 year-end target of BRL62.00. CSN shares closed at BRL26.00 Thursday, down 1.7%.