Vale Wants Brazil Copper Producer

Vale SA, the world’s largest iron- ore miner, wants to buy Brazilian copper producer Paranapanema SA for R$2.01 billion (US$1.1 billion) as it seeks to become one of the world’s top producers of the metal.

Rio de Janeiro-based Vale offered to buy all Paranapanema’s voting stock for R$6.30 a share at an auction on Sept. 1, according to a Brazilian regulatory filing. The bid represents an 8.6 percent premium to yesterday’s closing price. The offer is subject to the purchase of at least 50 percent plus one of the company’s voting shares, according to Vale.

Vale, which already produces copper in Brazil and Canada, said it aims to become one of the world’s largest producers of the metal in the medium term, rivaling companies such as Xstrata Plc and Anglo American Plc. Vale plans to invest $400 million with African Rainbow Minerals Ltd. to develop a new copper mine at Konkola North in northern Zambia.

The acquisition is “positive on the strategic front” because it means Vale wouldn’t need to invest in additional smelting capacity to process copper from its Salobo and Alemao projects, Deutsch Bank analysts Rodrigo Barros and Jorge Beristain said.

Paranapanema produces about 220,000 tons of copper cathodes per year at its Camacari smelter, in Brazil’s northeastern Bahia state, with an expansion project expected to take that to 277,000 tons. The company also produces 78,000 tons of semi- processed products such as sheet, tubes and bars at plants in Sao Paulo and Espirito Santo states.

Vale currently produces about 300,000 tons per year of copper from its Sossego mine in Brazil’s Para state and at the Canadian sites of Sudbury and Voisey’s Bay.

Santiago-based Codelco, the world’s largest copper miner, produced about 1.78 million tons last year. Freeport-McMoran Copper & Gold Inc. is second, with 1.6 million tons. Xstrata is ranked as the No. 4 producer and Anglo as No. 6, according to Bloomberg data.