Sumitomo Corp. to Acquire Usiminas’ Iron Ore Interest for US$ 1.9 Billion

Sumitomo Corporation announced on Thursday the firm reached basic agreement to acquire iron ore interest from Brazilian major steel maker, Usiminas. Sumitomo Corp. pays maximum US$ 1.929 billion to get 30% share in Usiminas’ iron ore mining subsidiary. Sumitomo Corp. joins Usiminas’ iron ore expansion project as the strategic partner to expand the iron ore production to around 30 million tonnes by 2015 from current 7 million tonnes level. Sumitomo Corp. tries to develop the Brazil based iron ore business to world No.4 iron ore major shipper by developing alternative source when world major 3 iron ore major control majority of world supply.

Sumitomo Corp. and Usiminas will sign definitive agreement by end of August. Sumitomo Corp. will subscribe primary share in Usiminas’ subsidiary, Minera??o Usiminas (MUSA). Sumitomo Corp. pays US$ 1.35 billion at first and after the firm confirms expansion from mining to port facility and asset value the firm pays additionally up to US$ 1.929 billion.

Usiminas announced on Wednesday the firm transfers around 2.4 billion tonnes resource of iron ore mining assets in Serra Azul region, Minas Gerais to MUSA. The firm expects the mining expansion costs R$ 4.1 billion through 2015.

Usiminas also transfers part of share of rail company, MRS Logistica, land for port facility in Rio de Janeiro and equity in ore loading terminals to MUSA.

Under the expansion, MUSA’s iron ore production will reach around 30 million tonnes as early as in 2014. The firm eyes more than 20 million tonnes per year of export including several million tonnes to Japan and balance for China and India while the firm sells iron ore to Usiminas and Brazilian companies.

Sumitomo Corp. has 1.1 million tonnes of iron ore interest in fiscal 2009 ended March 2010 through indirect investment in Assmang of South Africa. Through the investment in MUSA, the firm’s captive iron ore will reach 3.4 million tonnes in fiscal 2010 and more than 10 million tonnes after the expansion.