London - Commodities trader Glencore has bought an unspecified stake in unlisted Brazilian iron ore exporter Ferrous - its first equity stake in a producer of the steelmaking commodity.
The Swiss-based trader and miner has also agreed to buy 20 million tonnes of iron ore from Ferrous over four years, in a deal that feeds Glencore's ambitions in a sector that has long remained the preserve of major mining groups Vale, Rio Tinto and BHP Billiton.
Ferrous, which has twice failed to raise capital through share offerings, has long been seeking a partner to bankroll its ambitious expansion plans, and the miner said on Wednesday the Glencore agreement strengthened its financial position.
“The agreement guarantees a substantial part of the company's production until 2016,” chief executive Jayme Nicolato said.
Ferrous, which produced 3.2 million tonnes of iron ore in 2012, is targeting 5 million tonnes this year and wants to raise output to 17 million tonnes from 2016.
Glencore, like rival trader Vitol, has big ambitions for iron ore, which it hived into a separate business arm last year. It has since struck deals to buy output from emerging producers such as African Minerals and Bellzone.
Glencore and Vitol are competing for space in an iron ore market dominated by BHP, Rio and Vale with a combined share of around 60 percent, leaving even the world's largest commodity traders to battle over production in emerging iron ore basins such as west Africa.
Glencore has also been circling smaller Brazilian producers.
Sources with knowledge of the matter said last year it was one of the suitors for Anglo American's Amapa iron ore mine, eventually sold to Zamin in January. - Reuters