Sao Paulo, Brazil (Platts)--20Aug2014/538 pm EDT/2138 GMT
One day after saying it would not file a judicial recovery petition, usually a prelude to seeking bankruptcy protection, Brazilian mining company MMX said Wednesday that low iron ore prices have forced a 30-day shutdown of operations at its Serra Azul mine.
The mine closing was necessary due to "a prolonged, sharp iron ore price drop on the international market and operating restrictions [imposed by] the Minas Gerais state environmental body until protected areas within the mine area are defined," the company said in a filing Wednesday with Brazil's securities commission, CVM.
The work stoppage is planned to begin the first week of September, MMX said, adding it is granting 30-day vacations to all operations workers at its mine.
"MMX is engaged in discussions with authorities to reach a solution ... and resume activities [in the] short term," the company said, adding it's also revising its business plan to focus on cash generation, "expecting to present [the new business plan] in the second-quarter results."
MMX's second-quarter results are slated to be released October 15, according to its website.
The Serra Azul mine, in Brazil's southeastern state of Minas Gerais, can produce up to 8 million mt/year of iron ore. Late in 2013, the miner scaled back its planned output increase to 15 million mt/year from the previous projection of 29 million mt/year due to financial difficulties. Thus far, the company has had difficulty finding a partner to assist in the expansion project.
Global media outlets reported this week the company was preparing to submit a court-backed financial protection petition by the end of this month. However, in a filing with CVM, the company said "there is no ongoing deliberation of the matter within the company."
At least one of the company's major shareholders said it is monitoring the situation.
"We are closely watching the situation," South Korea's SK Networks said in a statement. The company retains a nearly 9% equity stake in MMX.
Another MMX owner, the Abu Dhabi strategic investment/development company Mubadala Development, declined to comment. The firm recently reduced by an undisclosed amount its $2 billion investment in MMX, the company said in a statement August 5.
Former Brazilian billionaire investor Eike Batista owes Mubadala money related to deals he made prior to the collapse and break-up of his giant EBX industrial group, which includes MMX. Batista has been selling pieces of his ventures as missed economic targets, mounting debt and accumulating losses forced his oil and shipbuilding companies to enter into Brazil's judicial recovery proceedings last year.
MMX earlier this month entered into agreements to lease the mining rights of its Corumba unit to Vetria Mineracao, on the anticipated construction of a 2 million mt/year capacity iron ore processing plant. Corumba is located in Brazil's Mato Grosso do Sul state, near the Bolivian border.
In Q1, the miner reported a loss of Real 69.2 million ($30.50 million), larger than the year-ago loss of Real 55.2 million, due to a 12% drop in iron ore sales, to 1.2 million mt, from 1.3 million mt. This result was expected by the market, following the net loss of Real 2 billion for all of 2013, much deeper than the 2012 loss of Real 792.4 million.