Japan Steels, Traders to Lease MBR Interests to CVRD

Japanese major steel makers including Nippon Steel and JFE Steel and Japanese major trading firms said on Wednesday they agreed with the largest iron ore supplier of CVRD to lease interests in MBR, which is Brazilian iron ore miner controlled by CVRD, for 30 years for more than 170 billion yen. CVRD seeks synergy through integration of the iron ore operations including treatment facility and rail. Nippon Steel, JFE Steel and other Japanese partial owners keep relationship with CVRD for certain cash flow while Sumitomo Metal Industries, Mitsui & Co. and Sumitomo Corporation sell the interests to CVRD.Nippon Steel, JFE Steel and other Japanese minor owners lease the interest to CVRD for 30 years from May and they transfer the rights including voting right and acceptance of dividend to CVRD. Nippon Steel accepts US$ 20.5 million for the first year and annual US$ 16.3 million for 29 years and JFE Steel accepts US$ 14.4 million for the first year and US$ 11.5 million for 29 years. Kobe Steel, Nisshin Steel, Itochu Corporation, Marubeni Corporation and Mitsubishi Corporation also agreed for the lease and accept the consideration depending on the share. CVRD pay total US$ 60.5 million for the first year and annual US$ 48.1 million for 29 years. Sumitomo Metals, Mitsui & Co. and Sumitomo Corp. sell the interests for total US$ 230.8 million. CVRD has 49% interest in MBR and also controls 80% of EBM, which controls 51% of MBR. Japanese firms have 20% interests in EBM including 10% by integrated steel makers and 10% by Japanese trading firms. After the sellout by some Japanese firms, CVRD controls 86.247% of EBM with 13.753% share by Japanese firms. MBR produced 64 million tonnes of iron ore in 2006. The firm exported annual 6 million tonnes of ore to Japan through long term contracts.