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Wuhan Steel eyes stake in mining group

WUHAN Iron and Steel (Group) Corp, China's third-largest steel maker, may buy a stake in Brazilian mining group MMX Mineracao e Metalicos SA and build a steel plant there.

Potential business deals are set out in a memorandum of understanding signed by Wuhan Steel, MMX and LLX Logistica SA. MMX and LLX, both controlled by Brazilian billionaire Eike Batista, plan to sell assets.

If a steel plant is built in Port of Acu in Rio de Janeiro state, it will have an annual capacity of 5 million tons. Wuhan Steel will have a controlling stake in the project and EBX, Batista's holding company, may have a minority interest, MMX said in a statement late on Tuesday.

The announcement came amid Brazilian President Luiz Inacio Lula da Silva's state visit to China.

The arrangement could also include Wuhan Steel buying almost all of MMX's Sudeste unit's iron ore under a long-term contract at benchmark prices, an agreement on handling services at LLX's Sudeste port site in southeast Brazil, and the supply of steel from Wuhan to an MMX shipbuilding unit.

No value was given for the non-binding accord, but Batista said that "this business combination, once consummated, will likely represent the single most important Chinese investment in Brazil."

China has become Brazil's top trade partner this year, overtaking the US.

MMX currently has the capacity to produce 10.8 million tons of iron ore a year from its Sudeste and Corumba mines, but is working on lifting it to 40 million tons. The potential iron ore contract could provide almost the entire needs of Wuhan Iron and Steel, according to Steel Business Briefing.


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