Ferrous to raise $400m to back iron ore projects

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The Independent Online

Ferrous Resources, an ambitious Brazilian iron ore miner, said yesterday that it hopes to raise as much as $400m (£270m) by listing its shares in London.

The group, which reckons it will become a global top five iron ore producer, could be joined on the main board of the London Stock Exchange by another Brazilian iron ore group, Zamin Ferrous, which also is thought to be considering an initial public offering in London. Brazil is home to Vale, the world's second biggest iron ore producer.

The proceeds of the listing will be used to develop Ferrous's six existing iron ore facilities, and build a port. The group's chief executive, Mozart Litwinski, said: "We have been ready with the IPO since 2008, but we were initially stopped by the financial crisis. We have all the licences and land in place to get the project going and initial discussions with investors suggest that there is plenty of demand for the IPO."

Ferrous is hoping to raise between $350m and $400m, which will see the flotation of 25 per cent of the group. Mr Litwinski said that the money would be used to help the miner achieve its ambitious production targets.

Ferrous will tell investors that it aims to produce 25 million tonnes of iron ore by 2013, and 65 million tonnes by the end of 2016. Despite an output of 1.5 million tonnes of iron ore last year, Ferrous is not currently in production, preferring, Mr Litwinski insists, to concentrate on the projects that the IPO will fund.

Iron ore miners have enjoyed a return to health in recent months, after the recession in most parts of the world sent the price of the metal tumbling in early 2009. The return to growth has helped a recovery in prices.

The commodity has rocketed in the past six months, touching $190 a tonne in recent weeks, after it dropped to lows of $60 last year.

The price has been helped by a number of projects being mothballed when the value of the metal fell. A number of these are now coming back into production, with several analysts suggesting that recent highs could represent a high watermark for iron ore prices.

Last month, Evy Hambro, who manages two of the world's largest commodities funds, BlackRock's world mining fund and its world gold fund, said that he believed iron ore prices had reached their peak.

"Iron ore prices are unlikely to go much higher," he said. "The iron ore market is in a very strong bull market right now. It is driven by Chinese demand. We also see higher capacity utilisation in the US and European markets."

Zamin Ferrous, which also has assets in Uruguay, is considering a flotation in the UK, Brazil or Canada. The group has refused to comment on the listing.