Zamin Ferrous, which is controlled by former commodities trader Pramod Agarwal, will also buy a 30% stake in Amapá from co-owner Cliffs Natural Resources Inc. Anglo American valued the asset at $1.5 billion as recently as last year but the stake was likely sold for less than $600 million, according to a source with knowledge of the deal.
Anglo American bought the 70% stake in Amapá at the top of the market in 2008 as part of its $5.5 billion deal for the Minas Rio project. Anglo American took a $1.5 billion charge on the operation in 2009 as mine, plant and logistics problems cut production from a possible 6.5 million tons per annum to 2.7 million tons.
Cleveland, Ohio-based Cliffs will take a non-cash impairment charge of about $380 million to $420 million as a result of the sale, the company said in a stock exchange filing on Thursday. Cliffs, which had owned its stake in Amapá prior to Anglo American's acquisition of the majority holding, said that the sale followed a "broad auction."
Anglo American put Amapá on the block in July, when it transferred the business off its main asset register. Other companies reported to have taken a look at the asset included Glencore International plc and Russia's OAO Severstal.
Amapá, located in the northern Brazilian state of the same name, produced about 4.8 million tons of iron ore in 2011 and has resources of 271 million tons. Anglo American said in its 2012 report that the unit would produce about 5.5 million tons of iron ore in 2013.
"Zamin is buying at a good time in the cycle with iron ore prices recovering recently following the collapse in the middle of 2012 and renewed confidence in the industry's prospects," said Zamin's Agarwal. "The cash flows will assist Zamin's ability to develop other important projects such as the 18Mtpa (18 million tons per annum) Valentines Project in Uruguay."
Shares in Anglo American traded Friday at 1,974.5 pence ($31.97), down 40 pence, or 2%, on their Thursday close. Cliffs shares closed Thursday at $38.17 and traded marginally higher in the after-hours market ahead of the U.S. opening on Friday.
Jenner & Block LLP hired middle market private equity lawyer Jason Osborn from Kirkland & Ellis LLP in Chicago. For other updates launch today's Movers & shakers slideshow.
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