UPDATE 1-Vale's former boss Agnelli eyes Guinea potential again

Wed Nov 7, 2012 9:51pm IST

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* ArcelorMittal, Jonah Capital also among suitors-sources

* BTG, B&A to become financial, logistcs advisor to Conakry

By Clara Ferreira-Marques and Silvia Antonioli

LONDON, Nov 7 (Reuters) - A mining venture co-founded by the former boss of Vale, Roger Agnelli, is among suitors considering BHP Billiton's slice of the Mount Nimba iron ore deposit in Guinea, sources familiar with the matter said.

Others eyeing BHP's share of the venture that holds the Nimba concession include the world's largest steelmaker, ArcelorMittal, which mines iron ore just over the border in Liberia, the sources said.

A dealmaker by background, Agnelli is staging a return to West Africa with billionaire banker Andre Esteves. Two years ago, Agnelli led Brazilian miner Vale's push into Guinea, taking a stake in iron ore assets that, controversially, included blocks of the giant Simandou deposit confiscated by the government from rival Rio Tinto.

Agnelli, 53, was ousted from Vale last year after a decade at the helm. Analysts said his plans for a multinational Vale, did not chime with the Brazilian government's own, more nationalistic view.

He is returning to mining and Guinea through B&A Mineracao, a partnership between his venture AGN Participacoes and Esteves's investment bank BTG Pactual Group, just after Vale's new bosses shelved their major commitment in the country.

Vale's Simandou project, which it was developing with diamond magnate Beny Steinmetz's BSG Resources, was put on ice last month. The miner blamed cool demand and opaque regulation.

"The sale (of Nimba) is in a second phase now. B&A, ArcelorMittal and other suitors have visited the site in Guinea and Liberia and have made non-biding bids," one source with knowledge of the situation said. "Later this month the companies should come out with binding offers."

One of the sources said Jonah Capital, a private investment company which is a partner of Anglo American subsidiary Kumba Iron Ore in Liberia, was also among the suitors.

BHP, the world's largest miner, currently owns a stake of just over 40 percent in the venture behind the Mount Nimba deposit, as does gold miner Newmont. A third party, French power plant builder Areva, is being bought out of the venture, which will leave BHP and Newmont with a 50 percent slice each, one of the sources said.

BHP indicated earlier this year it was pulling out of Guinea, as projects there and in neighbouring Liberia fell victim to the global miner's efforts to tighten its portfolio. It has since said Australia and Brazil will alone be able to satisfy global demand for iron ore - without recourse to new producing regions like West Africa.

BHP's exit was a blow for Guinea, which had been courting investors, and hopes a new mining code - backed by George Soros - will help clean up the industry and encourage investment.

Investment bank Nomura is managing the sale, which is expected to include other BHP concessions in Guinea and BHP's projects in Liberia. One source put the potential value of the sale at up to $500 to $600 million.

BHP has said it is reviewing its projects in the region, but declined to comment.

ArcelorMittal, Areva and B&A Mineracao, set up in July with a $520 million war chest, also declined to comment. Newmont and Jonah Capital were not immediately available for comment.

PERSONAL REVENGE?

Agnelli's fresh foray into Guinea has been seen by some in the industry as an attempt to eventually take on Vale and take a slice of Simandou, one of the world's largest untapped iron ore deposits. Agnelli is already going head to head with Vale at home, taking a stake in Rio Verde, which mines potash and phosphate, areas of activity for Vale too.

Simandou, one industry source pointed out, was Agnelli's "baby": "Is it personal revenge? Absolutely," the source said.

Vale partner BSG, for one, has been ruffled by a potential advisory role for BTG Pactual with the Guinea government and has threatened to use "all legal means" to defend its interests.

Others though, said B&A Mineracao had no plans to take on Simandou, a project which for the Vale-BSG blocks alone could cost an estimated $10 billion to develop.

"Some have the perception that Agnelli is actively trying to get a stake in Simandou but I think this is wrong," said the first source close to the situation. "The focus of B&A right now is to win the bidding for the Nimba project."

BTG Pactual is expected to be named as a financial advisor to Conakry while B&A will provide logistics advice, specifically for the slice of Simandou held by Rio, one source said.

PROMISING DEPOSIT

Nimba, an early-stage project , is promising, but as for most iron ore deposits in the region, miners developing it will need to overcome a chronic lack of infrastructure. It also faces environmental scrutiny, given its proximity to a World Heritage site in the forested south of Guinea.

Any producer would likely need to export through Liberia.

"The logical buyer is ArcelorMittal. This is theirs to lose," said another source close to the situation, pointing to existing rail and other infrastructure the steel giant already operates just over the border from BHP's Nimba.

Arcelor has sought in recent years to cut its dependence on producers of steel ingredients. It began exporting from the Yekepa mine on the Liberian side of Nimba last year.

And BHP and ArcelorMittal do have a history - the two sides held talks two years ago to combine their Guinea and Liberia assets though negotiations failed. ArcelorMittal, though, is now wrestling with a heavy debt burden and dire markets.

"Agnelli has money to spend... but for a financial investor, this is not the easiest asset to start with," one of the sources close to the situation said.

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