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6/01/00 BHP Billiton Ltd 6-K 5/31/00 2:43K
Report of a Foreign Private Issuer — Form 6-K
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6-K — Report of a Foreign Private Issuer
Date 31 May 2000
BHP and CVRD enter Agreement to Rationalise the Alegria Iron Ore Complex in
The Broken Hill Proprietary Company Limited (BHP) today announced that it has
reached an agreement with Companhia Vale do Rio Doce (CVRD) to enter into a
joint venture aimed at rationalising the Alegria Iron Ore Complex in Brazil.
The formation of the proposed joint venture is underpinned by CVRD's
acquisition today of a 63.06% shareholding in Sociedade Anomima Mineracao da
Trindade-Samitri (Samitri) from the Arbed Group for US$525 million.
Samitri currently owns 51% of Samarco Mineracao SA (Samarco) with BHP holding
the remaining 49%. BHP and CVRD have agreed that following the acquisition
by CVRD of Arbed's shareholding in Samitri, BHP will acquire a further one per
cent shareholding in Samarco which will equalise its ownership with Samitri at
50:50. A new Shareholder Agreement will be finalised to reflect the new
ownership structure of Samarco.
Samitri and Samarco both have iron ore mining and processing operations in the
Alegria Complex. Details of their respective reserves, production,
processing facilities and products are attached. The agreement between BHP
and CVRD will facilitate the restructuring of Samitri and Samarco operations
aimed at increased efficiencies, reducing costs and improving Samarco's
President BHP Minerals Ron McNeilly welcomed the agreement with CVRD, the
world's largest iron ore producer. 'It is a practical demonstration of BHP's
portfolio management activities designed to capture synergies in key business
areas by partnering with major industry players,' Mr McNeilly said.
'Purchase of the additional 1% shareholding in Samarco provides BHP with joint
control of a high quality asset which enjoys strong demand for its products.
We expect to capture significant operating efficiencies and savings between
the neighbouring Samarco and Samitri mines.'
BACKGROUND INFORMATION - SAMITRI & SAMARCO
Samitri is a publicly listed Brazilian iron ore producer. The company's
principal asset is its 51% interest in Samarco, a large, low-cost Brazilian
iron ore pellet producer. In addition, Samitri owns and operates four iron
ore mines - Alegria, Corrego do Meio, Morro Agudo and Andrade - in the state
of Minas Gerais, Brazil.
Samitri currently has an annual production base of approximately 15 million
tonnes of iron ore products; comprising sinter feed and concentrate (88%) and
lump (12%). Apart from approximately 1.5 million tonnes of concentrate (which
is sold to Samarco on an arms length basis), all of Samitri's products are
railed under contract to the port of Tubarao in the state of Espirito Santo.
Both the rail and port facilities are owned by CVRD.
Exports comprise approximately 75% of Samitri's sales on a tonnage basis.
Europe is the dominant export market with customers in this region accounting
for approximately 60% of all sales. In 1999, Samitri reported sales revenues
of US$181.2 million and net profits of US$53.3 million.
Samitri - Sales and Financial Highlights (1)
(year ending 31 December) 1999 1998 1997
Iron Ore Sales (tonnes millions) (2)
Sinter Feed & Concentrate 12.5 14.5 12.6
Lump 1.9 1.7 1.3
Total 14.4 16.2 13.9
Revenue & Net Profit (US $million)(3)
Gross Sales 181.2 240.3 200.7
Net Profit 53.3 49.3 31.5
Source: Samitri Annual Report; Samitri Audited Financial Statements (FAS 52
1. Figures may not add due to rounding
2. Wet metric tonnes
3. Samitri's interest in Samarco is equity accounted
Samarco is a privately held Brazilian iron ore pellet producer, owned 51% by
Samitri and 49% by BHP (1). Samarco owns and operates one of the largest and
lowest cost iron ore pellet plants in the world.
Samarco's main operations comprise: an open-pit mine and concentration plant
at Alegria; a pellet plant and port facility at Ponta Ubu; and a 396km
concentrate slurry pipeline which links the mine and pellet plant. In
addition, Samarco has shareholdings in two hydroelectric power stations,
Guilman-Amorin (140MW, 49% owned) and Muniz Freire (25MW, 100% owned).
Over the past five years, Samarco has invested more than US$540 million to
double the productive Capacity of the Ponta Ubu filtering and pellet plant.
The facility is currently operating at its expanded design capacity of 12
million tones of pellets and 2 million tonnes of pellet feed. In 1999,
Samarco produced approximately 10 million tonnes of pellets and 2 million
tonnes of pellet feed.
Samarco has a Probable Ore Reserve (2) of 739 million tonnes at 46.7% Fe. The
current reserve base is dominated by low-grade itabirite ore and is sufficient
to sustain operations for over 20 years at current production rates and
continuation of existing arrangements with Samitri for supply of concentrate.
Samarco exports all its iron ore products to customers in Europe, America,
Asia, Africa and the Middle East. In 1999, Samarco reported sales revenue of
approximately US$339.2 million and net profits of US$72.3 million.
Samarco - Sales and Financial Highlights
(years ending 31 December ) 1999 1998 1997
Iron Ore Sales (tonnes million) (2)
Pellets 10.4 9.4 5.7
Pellet Feed (Concentrate) 1.8 2.0 3.4
Total 12.1 11.3 9.1
Revenue & Net Profit (US$ million)
Gross sales 339.2 370.8 255.4
Net Profit 72.3 46.0 45.1
Source: Samarco Management Reports; Samarco Audited Financial Statements
1. Figures may not add due to rounding
2. Dry metric tonnes
BHP is one of the world's leading diversified natural resource companies with
revenues of approximately US$13 billion and an equity market capitalisation in
excess of US$18 billion.
BHP has three main areas of business - Minerals, Petroleum and Steel. The
main activities of the Minerals division include the production and processing
of iron ore, copper and coal.
BHP's iron ore interests are primarily located in Australia and include
controlling joint venture interest in two world class mines - Mt Newman and Mt
Goldsworthy. In addition, BHP has a 49% interest in Samarco (refer above).
In the year ended 31 May 1999, BHP share of iron ore production was
approximately 66 million tonnes.
CVRD is the world's largest producer and exporter of iron ore. The company is
the dominant mining company in Latin America and one of the largest companies
in Brazil. CVRD has revenues in excess of US$2.4 billion and an equity market
capitalisation of approximately US$9.0 billion.
CVRD has three key operating divisions - Iron Ore, Non Ferrous Minerals
(primarily gold, base metals and industrial minerals) and Logistics (primarily
rail and port services). In addition, the company has interests in aluminium,
forestry and steel.
CVRD operates two world class integrated systems in Brazil for the production
and distribution of iron ore. The Southern System is located in the States of
Minas Gerais and Espirito Santo and the Northern System is located in the
States of Para and Maranhao. Each system includes extensive iron ore
reserves, mines, processing plants, five under joint ventures with
international partners. In the year ended 31 December 1999, CVRD sales of
iron ore and pellets reached over 93 million tonnes.
1. Under the terms of agreement, CVRD and BHP will equalise the ownership of
Samarco through the sale by Samitri of an additional one per cent interest in
Samarco to BHP. Following the sale, Samarco will be owned 50% by CVRD and 50%
2. The information in this release that related to Samarco's Mineral
Resources and Ore Reserves is based on information compiled by Julio Tizon,
who is a member of the Aus IMM and is a full time employee of Samarco. Julio
has sufficient experience which is relevant to the style of mineralisation and
type of deposit to qualify as a Competent Person as defined in the 1999
edition of the "Australian Code for Reporting Mineral Resources and Ore
Reserves". Julio Tizon consents to the inclusion in the release of the
matters based on his information in the form and context in which it appears.
MEDIA RELATIONS: INVESTOR RELATIONS:
Mandy Frostick Robert Porter
Manager Media Relations Vice President Investor Relations
Ph: +61 3 9609 4157 Ph: +61 3 9609 3540
Mob: +61 419 546 245 Mob: +61 419 587 456
Senior Media Relations Advisor Pierre Hirsch
Ph: +61 3 9609 3709 BHP Investor Relations San Francisco
Mob: +61 417 914 103 Tel +1 415 774 2030
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