CSN reaches deal with Namisa on iron ore asset consolidation

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The assets from CSN and Namisa will be merged into a separate company, CSN said in a statement filed with the country’s securities regulator, CVM, on Monday November 24.

The firm, however, did not disclose further details about the move.

Namisa is 60%-owned by CSN, with the remaining 40% belonging to a consortium formed by Japanese companies Itochu, JFE Steel, Kobe Steel and Nisshin Steel, plus China Steel Corp of Taiwan and South Korea’s Posco.

The transaction is pending board approval from the companies involved, which is not expected until December 12.

The deal also depends on the consent of local regulatory authorities, which is expected within 12 months, CSN said.

The partners in Namisa have been negotiating the consolidation of assets since last year, and have been trying to resolve their differences and avoid dissolution of the partnership.

CSN owns the Casa de Pedra iron ore mine in Brazil’s south-eastern Minas Gerais state, with production capacity of up to 21 million tpy.

Namisa owns the Engenho and Fernandinho iron ore mines, also in Minas Gerais state. Both mines produced 4.6 million tonnes of iron ore in 2012, down from 6.4 million tonnes in 2011.

Namisa and Casa de Pedra sold a combined 25.7 million tonnes of iron ore in 2013.

CSN said it plans to increase Namisa’s production capacity from the current 6.8 million tpy to 33 million tpy by 2016.

“The positive side of the deal is that it should halt the exercise of a put-option and that investment plans should be resumed,” Banco Fator analyst Artur Losnak said.

“But we understand that the transaction price should be negative for CSN, given the currently depressed iron ore price,” he added.

JP Morgan analyst Rodolfo Angele believes that CSN is working to avoid Namisa’s shareholders exercising a put-option against itself, related to a failure by CSN to reach operational targets in the development of Namisa.

“CSN may combine its Casa de Pedra in this new venture to avoid the penalty,” Angele said.

“While we don’t know the economics of the new mining venture, we view the transaction as negative,” he added, “as ultimately CSN is giving away a part of a valuable strategic asset – which is the Casa de Pedra iron ore mine.”