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Vale sells stake in CSA steel plant

World Coal,

Brazilian mining company, Vale, has sold its stake in Companhia Siderurgica do Atlântico (CSA) to German industrial conglomerate and CSA joint venture partner, thyssenkrupp. The 26.87% stake was sold for a “symbolic price” as part of Vale’s initiatives to streamline its asset portfolio, the mining company said.

Located in the industrial district of Santa Cruz in the state of Rio de Janeiro, CSA is an integrated steel mill complex that produces steel slabs for export. The plant has the capacity to manufacture up to 5 million tpy of steel.

In 1Q16, CSA posted a loss of €74 million as a recession in Brazil and a glut of steel on the global markets have put pressure on the business.

On completion of the sale, existing shareholder and other operative contracts between Vale and CSA will be renegotiated or cancelled, although Vale will continue to supply iron or the plant. The deal also includes an earn-out clause, which entitles Vale to a portion of any future sale of CSA.

According to the German company, the acquisition will “reduce complexity and risks, and increase its room for maneuver for the further development of CSA.”

The transaction is also subject to approval by thyssenkrupp’s supervisory board and the Conselho Administrativo de Defesa Econômica (CADE), Brazil’s competition regulator. But, according to research company, CRU, the transaction may have been timed to take advantage of the current political unrest in Brazil to avoid government intervention in the sale.

“This transaction reinforces Vale's strategy to sell non-core assets and its commitment to preserve financial strength,” the company said in a press release.

CSA was opened in 2010 as part of an costly effort by thyssenkrupp to grow its business in the Americas. Much of the €12 billion investment, which included CSA and another plant in Alabama in the US, has since been written off by the German company. The Alabama plant was sold in 2014 and thyssenkrupp has previously expressed an interest in selling CSA.

CSA’s simplified ownership structure may now make a sale easier – although the current woes in the steel industry will not make it an easy sell.

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