The latest from Timothy T Brock!
Yesterday, an iron-ore mining company owned by Brazilian tycoon Eike Batista filed for bankruptcy, the third time in a year that a unit of the former billionaire’s EBX industrial group has sought protection from creditors. The company that made the petition, MMX Sudeste Mineracao SA, currently holds all of the significant assets of Batista’s MMX Mineracao e Matalicos SA, which is part of an EBX mining, oil, energy, shipbuilding and port group that suffered a massive collapse back in 2013.
This move comes at the end of a decade-long commodities boom, with the price of iron ore falling to around its lowest level in five years. As the Chinese economy has begun to weaken, the demand for iron ore and other minerals has started to drop, and lower prices have made many new mining projects uneconomic. Chances are that the MMX Sudeste petition will determine whether its parent, MMX, can continue as a viable company. Delays in the development of MMX iron ore mines in Minas Gerais and iron ore terminal near Rio de Janeiro have hindered MMX revenue while increasing debt.
Due to expectations that Brazil would prosper as China grew, Batista was able to build an industrial empire worth more than $50 billion, in addition to a personal fortune of about $30 billion. He was Brazil’s richest man, and as recently as 2012, the seventh-richest man in the world. However, failure to meet production promises back in 2012 started a decline in EbX group shares. Batista ran out of credit and his fortune evaporated. In October and November of 2013, OGX and shipbuilder OSX Brasil SA sought bankruptcy protection. Back in September, Brazilian prosecutors filed criminal charges against Batista, accusing him of manipulating the market. The courts also froze $611 million of his and his family’s assets. Previously, Batista had sold most of his holdings to pay debt, in addition to most of MMX’s share of an iron ore port near Rio de Janeiro. However, MMX has remained his principal asset. In 2008 they sold their Minas-Rio iron ore project to the London-based Anglo American Plc for $5.5 billion. With that money, Batista launched OGX, OSX and the rest of the EBX Group that crash-landed last year.
After the sale to Anglo-American, MMX moved to develop another iron ore project in the highlands of Minais Gerais. They also currently have an agreement to operate the Pao de Vinho iron-ore prospect.