Capital Gold president John Brownlie defends the company’s acquisition of Canadian miner Nayarit Gold for $41m, saying the asset is part of a handful of acquisitions the company is eyeing. Analysts have questioned the deal as they deem the target too small to contribute to Capital Gold’s growth. “We are looking at a 70,000-ounce producer,” Brownlie tells LatinFinance, adding that a deal will hopefully be announced during the first half of the year. Brownlie says he is also looking to buy other mining assets in northern Mexico. If these deals go through, Capital Gold will surpass its goal of producing more than 100,000 ounces of gold a year, he claims. “We could go beyond 200,000-250,000 ounces with 70,000 ounces coming from El Chanate [Capital Gold’s main asset,] 50,000 from Nayarit and 70,000 [from the potential target,]” he says.
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Peru Securitizer Readies RMBS
Titulizadora Peruana plans to sell Monday its first ever mortgage-backed security offering, according to officials. The securitization specialist owned by Titularizadora Colombiana has been pitching the deal worth up to $35m to local investors. The 20-year paper, backed by mortgages from BCP and Interbank, has an average life of 9 years and will pay fixed rate. The bond is dollar-denominated to match the currency of the loans. Subordinated bonds will represent about 6% of the issuance. BCP’s Credibolsa unit and Inteligo are placement agents for the deal, rated AAA on a national scale.
Barrick Buys into Chile Mine Stake
Barrick Gold has agreed to pay $475m for 25% of the Chilean Cerro Casale gold mining project from Kinross Gold. Of the total amount, Barrick will pay $455m in cash, the buyer says. In addition, a $20m so-called contingent obligation contract, which was payable by Kinross to Barrick, was canceled. After the close of the deal, Barrick’s interest in Cerro Casale will increase to 75%. On a life-of- mine basis, Barrick says its share of average annual production is anticipated to be about 600,000-650,000 ounces of gold and about 170m-190m pounds of copper at total cash costs of about $140-$160 per ounce. A Barrick spokesman says the deal was privately negotiated.
ISA Focuses on Diversification
Luis Fernando Alarcon, CEO of Colombia-based ISA is focused on diversifying away from energy transmission. “We have determined that we want to grow in other areas such as highway concessions and gas pipelines, among others,” he tells LatinFinance. “By 2016, we want 20% of our income to come from these other sectors,” Alarcon adds. ISA is in the process of finalizing the acquisition of a 60% stake in Cintra Chile from Spain’s Grupo Ferrovial for about $300m. It plans to exercise an option to buy the remaining 40%. “Cintra expects to finish its Ruta 5 project in Chile in a few months and we want to have the support of [Grupo Ferrovial] until that project is completed. After that we would begin working on acquiring the remaining stake,” Alarcon explains. ISA recently won Autopista de la Montana, 40-year concession which will require an investment of $2.5bn. Alarcon expects construction to begin in 2011. Elsewhere, ISA is developing fiber optic networks through its Intenexa unit, which already operates in Ecuador, Peru and Colombia. “We aspire to connect all of South America and Central America,” Alarcon says. The diversification strategy does not entail divesting electricity transmission, the executive notes. ISA is working on an environmental impact study to build and operate an electrical interconnection line between Colombia and Panama, a project it will develop with joint venture partner Etesa of Panama. BBVA is helping ISA secure financing for the project. Alarcon says ISA has already received expressions of interest from multilaterals including the IDB, CAF and IFC, as well as private banks.
Brazilian Sweeties Tie Knot
Odebrecht’s ETH Bioenergia unit and competitor Brenco have finalized plans to merge under the name ETH, the two say, in order to better compete in the Brazilian sugar and ethanol sector. The two will invest BRL7.3bn through 2012, as they push to take market share from leader Cosan. In the deal, Brenco’s assets will be absorbed into ETH’s, resulting in a structure where ETH shareholders control 65% of the new ETH, and Brenco’s 35%. ETH aims to produce 3bn liters of ethanol and generate 2,700 Gwh of biomasse energy per year by 2012. The new entity will feature a 10 member board, with 7 from the ETH ownership block of Odebrect and Japan’s Sojitz Corporation. Brenco is owned by investors led by venture capitalist Vinod Khosla and AOL founder Steve Case.
Mexico Pension Reforms Boost Flexibility
Mexican pension regulator Consar has approved two changes to the investment regulations governing Mexico’s pension funds (Afores), allowing the funds more flexibility in volatile periods and more flexibility in equity investment, it says. Afores manage over $100bn in local assets. The first change is allowing the value at risk (VAR) limit the regulator places on the funds to adjust with market volatility. This aims to reduce the funds’ pro-cyclicality in crisis periods such as the end of 2008, when many funds had to sell off assets at depressed prices or ask for special permission to exceed the risk limit in order to hold onto them. Regulators will also now allow Afores to buy individual listed Mexican equities, that are part of an approved index and have “medium- to high” liquidity levels. The maximum weight of such an individual stock with these characteristics in the Afores portfolios will be equal to the stock’s weight in the Bolsa index. Previously, pension funds could only get exposure to individual large and medium stocks buy buying the index they were a part of, or by buying small stocks outside the index. “New opportunities to buy individual equities without having to replicate an approved index will present a new challenge for Afores managers to polish their stock-picking abilities, and could lead to increased divergence in investment performance. The downside, however, is that this could also lead to a widening gap in valuation and liquidity between the large- and small-cap names.” Credit Suisse says in a report. The bank also notes that the new VAR calculation appears to be more consistent with a wide open investment regime that remains yet largely unexploited by Afores.
Costa Verde to Scoop up Pinera LAN Stake
The board of Axxion, the holding company through which Chile’s president-elect Sebastian Pinera owns 19.0% of airline LAN, has decided to offer its shares in the airline to Costa Verde Aeronautica, which already holds a 25.0% stake in the company. Inversiones Santa Cecilia, another Piñera-controlled company which holds a 7.3% in the airline, has offered to sell a 2.1% share to Costa Verde. The value of the deal amounts to $1.2bn, or CLP9,099.58 per share. Costa Verde has 20 days to accept or reject the offer, Axxion says in a regulatory filing. Costa Verde recently announced a $1bn capital increase through the issuance of 500m shares. Equity analysts in Chile covering LAN believe the capital increase will be used to acquire the stake in the airline. Axxion shares closed at CLP22,301.00, down 6.69%.
IMPSA to IPO Renewables Unit
Argentina’s Industrias Metalurgicas Pescarmona (IMPSA) has filed to spin off its renewables business through a Bovespa IPO. If successful, the moves would mark the second time an Argentine entity lists BDRs on the Bovespa, though Venti, as the unit is called, is technically a Luxembourg company. The first issuer was Banco Patagonia, which listed shares in Brazil in 2007. However, Venti, which is controlled by the Pescarmona family, has renewable energy assets in LatAm and Southeast Asia. It’s LatAm holdings include wind and hydro in Brazil, which accounts for the majority of revenues, Argentina, Chile, Venezuela and Colombia, while in Southeast Asia, it owns assets in Vietnam and Malasia. In 2009, hydro revenues totaled BRL265m while its wind businesses generated BRL133m. Total Ebitda in 2009 came in at BRL120m. Proceeds of the offering will go to investments in existing wind parks and hydro facilities (45%), new projects (30%) and working capital (25%). In December, IMPSA Wind, the wind power unit of the group that will become part of Venti, won concessions to operate 8 lots in the Brazilian state of Ceara totaling 211MW. That will likely demand investments of over BRL1bn. Total wind investments in Brazil in the coming years are expected to total BRL2.5bn, according to executives close to the initiatives. Bank of America-Merrill Lynch and BTG Pactual have been hired to lead the deal.
Slow Convergence for Santander Brazil, Says CFO
Santander’s Brazil unit, which went public via a BRL14bn IPO in October 2009, will likely take up to 2 years or more to see its valuations converge with its larger peers Bradesco and Itau Unibanco, says CFO Carlos Galan. “To expect to converge [with other banks’ valuations] this year would be unrealistic,” he tells LatinFinance. “As we gradually fulfill our objectives, I expect we will converge and capture the differential we have with [Bradesco and Itaú],” says Galán. The statement is a departure from what at least some bankers and Santander executives sought going into the IPO process last year. At the time, some of the more bullish expectations included a valuation on par with or above Bradesco’s, though investors were unanimous in demanding a discount to compensate for the lack of a track record. The touted IPO was priced at the BRL23.50 midpoint of the stated range, but quickly traded down. As of yesterday it was 5.6% below its issue price. The deal came at 2.7x price to tangible book and a P/E of 10.7x, substantially below Bradesco. Earlier this week, Santander units were trading at a discount to Bradesco’s preferred shares of over 20% on a P/E and 20% on a P/BV basis, according to Economatica. Discounts to Itaú Unibanco PNs were approximately 35% and 40% for P/E and P/BV, respectively. While the bank expects strong growth in a number of products, integration remains the chief concern and Galan expects that to be wrapped up by Q3. The unti’s first 2 quarters have failed to impress some analysts. “We found weaker margins and the stagnant asset quality disappointing,” says Goldman Sachs in a report following Santander’s Q4 earnings announcement earlier this month. The shop, which was the first to initiate coverage of Santander’s Brazil-listing, has a neutral recommendation on the stock. “They promised a lot of things during the IPO and are having trouble delivering them,” says a São Paulo-based banks analyst at a European shop, referring to overall performance o
Mexico GDP Outlook Brightens
Mexico’s finance ministry has improved its outlook for GDP growth in 2010 to 3.9% from 3.0%, as non-oil exports, domestic demand and activity in manufacturing, commerce and transportation show signs of rebounding. “The new forecast is in line with those of private sector analysts and international entities, which agree that the Mexican economy will grow more than previously expected in 2010,” says the finance ministry.