Vale S.A. said March 31 that it has reached an agreement with The Mosaic Co. and Mitsui & Co. Ltd. to sell minority stakes in the Bayóvar project in Peru through a newly-formed company that will control and operate the project.
Subject to the terms and conditions set forth in the definitive share purchase agreement, Vale has agreed to sell 35 percent of total capital to Mosaic for US$385 million, and 25 percent of total capital to Mitsui for US$275 million. Following the consummation of these transactions, Vale will retain control of the Bayóvar project, holding 51 percent of the voting shares and 40 percent of total capital of the newly-formed company.
Bayóvar is a phosphate rock project located in Sechura, department of Piura, Peru. It consists of an open-pit mine that is expected to have production capacity of 3.9 million mt/y, and a maritime terminal. Completion is expected in the second half of 2010. The sale of these minority stakes will facilitate the offtake of product from the Bayóvar project.
Actual closing of the transaction remains subject to the parties’ finalization of the definitive shareholders’ agreement and commercial offtake agreements, certain governmental regulatory approvals, and other customary closing conditions. However, Mosaic said it is expected to close within three months.
Mosaic said that the deal includes a commercial offtake supply agreement that would give Mosaic the right to purchase 35 percent of the phosphate rock produced from the Bayóvar mine. The Bayóvar rock will be used in Mosaic’s global phosphate operations. Phosphate rock production at Bayóvar and deliveries to Mosaic are expected to begin in the second half of calendar 2010.
“This transaction advances our strategic objective to secure additional phosphate rock outside of North America,” said Jim Prokopanko, Mosaic’s President and CEO. “Bayóvar enhances Mosaic’s existing 35-year phosphate rock reserves in Florida and reinforces our commitment to remain one of the top integrated phosphate producers in the world. We look forward to our new partnership with Vale and Mitsui.”
Mosaic told analysts April 1 that there are plans to expand the Bayóvar mine significantly, and that it expects to be a participant in that expansion and incur its pro rata share of those costs. However, it added that this is a decision that will not be coming down the pike for a couple of years.
Mosaic expects the landed cost of its Bayóvar rock to Florida to be very competitive with its own Florida rock costs. Prokopanko said that Mosaic will be paying a market price for the rock as a customer of the joint venture.
Prokopanko said Mosaic Florida mine capacity is 17 million mt of rock per year, and that the company purchases 1.5 million mt per year for its various facilities. He said that the Bayóvar purchase will give Mosaic essentially complete self-sufficiency in its rock sourcing needs.
Prokopanko said the Bayóvar deal had nothing to do with Mosaic’s recent sale of its stake in Fosfertil to Vale.