CCM: CMOC to acquire Anglo American’s niobium and phosphate businesses for USD1.50 billion 08-25-2016

In early May 2016, China Molybdenum Co., Ltd. (CMOC, stock code: 603993) released an announcement, showing that the company was planning to acquire the phosphate and niobium businesses in Brazil from Anglo American plc (Anglo American) for USD1.50 billion.

                                                                                       Source: Baidu

To be more specific, the phosphate business consists of the Chapadão mine, Ouvidor beneficiation plant, Catalão and Cubatão chemical plants, and two high grade undeveloped deposits (Coqueiros and Morro Preto) situated in Goiás state, Brazil.

The niobium business consists of the Boa Vista Mine, Area Leste, Mina I/II and Morro do Padre deposits. Processing operations include the newly-built Boa Vista Fresh Rock ("BVFR") plant, the BV plant and the Tailings Plant which recovers niobium from processing phosphate tailings from the Chapadão concentration plant. The niobium business also includes a marketing function located in London and Singapore.

According to the announcement, in 2015, Anglo American's total output of phosphate reached 1.34 million tonnes and its niobium output hit 6,300 tonnes.

"This transaction marks another important milestone for the Company's overseas growth consistent with our corporate strategy. By pursuing this transaction, we solidify our leadership position in specialized alloys while establishing a meaningful strategic position in Brazil and South America," CMOC Chairman and Executive Director Mr. Li Chaochun commented.

Besides, he also disclosed that the company has been negotiating with Anglo American on this transaction since 2009 and the company has prepared a great amount of cash for this transaction (as of the end of 2015, CMOC owned financial assets that can be transferred into cash at any time of about USD2.82 billion-RMB18.20 billion).

It is worth noting that many outstanding companies competed with CMOC on the acquisition of Anglo American's niobium and phosphate businesses in the last round of bid. They were The Mosaic Company (the world's leading producer and marketer of concentrated phosphate and potash), Companhia Vale do Rio Doce (the largest diversified mining company in America) and EuroChem (one of the world's leading mineral fertilizer producers).

CMOC won the bid at a purchase price of USD1.50 billion. In the evaluation of the niobium and phosphate businesses, analyst from the Bank of America Merrill Lynch thought that they were only worth USD800 million to USD1.10 billion and analyst from the BMO Capital Markets also considered that USD1.50 billion may higher than market expectation.

CCM believes that CMOC’s sufficient cash and declining financial performance in 2015 were the two key factors that prompted the transaction.

In 2015, market prices of bulk commodities and metals further declined globally. Under such circumstance, profitability of CMOC’s traditional business fell sharply. According to its 2015 financial report, CMOC gained a revenue of USD650.04 million (RMB4.20 billion) with a YoY decline of 37.01% and a net profit of USD117.87 million (RMB761 million) with a YoY decrease of 58.28%.

To acquire Anglo American’s niobium and phosphate businesses will boost CMOC’s financial performance in the near future. According to CCM’s research, Anglo American’s niobium and phosphate businesses attributed a revenue of USD544 million and a net profit of USD163 million to the company in 2015. Given this, this acquisition will double CMOC’s revenue and net profit.

As a matter of fact, CMOC had experience in enriching its business profile and improving its profitability by carrying out merger and acquisition in the overseas markets. For example, in 2013, it acquired 80% of the shares in Northparkes Mines to march into the copper ore industry and this contributed substantial profits to CMOC in 2014, accounting for more than 30% of the company’s total profit (USD282.51 million – RMB1.82 billion).

In addition to this, CMOC is primarily engaged in the mining and processing, smelting, deep processing, trade, research and development of molybdenum, tungsten, gold and other precious metals. So it will be the first time for it to enter the phosphate and niobium markets.


This article comes from Phosphorus Industry China Monthly Report 1605, CCM


About CCM:

CCM is the leading market intelligence provider for China’s agriculture, chemicals, food & ingredients and life science markets. Founded in 2001, CCM offers a range of data and content solutions, from price and trade data to industry newsletters and customized market research reports. Our clients include Monsanto, DuPont, Shell, Bayer, and Syngenta. CCM is a brand of Kcomber Inc.


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Tag: phosphorus  phosphate


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