Beny Steinmetz Group Resources Ltd. (BSRG) has sold 51% of its subsidiary BSG Resources (Guinea) Ltd. to Brazil's Vale SA (Bovespa: VALE) for $2.5 billion, reflecting a company value of $5 billion for the unit. The valuation makes this the deal of the year by an Israeli company, on par with the sale of 80% of Iscar Ltd. by the Wertheimer family to Warren Buffet's Berkshire Hathaway Inc. (NYSE:BRK.A; BRK.B), also at a company value of $5 billion.
Vale will initially pay $500 million in cash for BSG Resources (Guinea), and will pay the rest in milestone payments. The down payment will turn BSGR into a more liquid company.
Vale, the world's largest iron-ore producer, has a market cap of $156 billion. Its mines also produce gold, nickel, copper, aluminum, and other metals.
BSGR and Vale will set up a joint venture for BSG Resources (Guinea), with Vale owning 51% and BSGR owning 49%. BSGR says that it will continue to play an important role in the venture, and that its employees will continue to work there.
The valuation for BSG Resources (Guinea) was derived from the iron-ore deposits in its mining licenses at Simandou and Zogota, among the world's largest iron ore deposits. Before the Vale deal, BSGR had an agreement with the Guinea government to develop the Zogota deposit and had an exclusive export license for the ore through neighboring Liberia.
BSG says that it plans to start producing from Simandou in 2013, with output reaching up to 100 million metric tons a year. Zogota, set to start in 2012, will have the capacity to produce 25 million tons a year.
Published by Globes [online], Israel business news - www.globes-online.com - on May 2, 2010
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