Cosan (CSAN3) announced on Monday that it will start a new investment strategy, with a new investment structure, including the purchase of TUP Porto São Luís and the creation of a future joint venture in the mining sector. The company thus enters the mining and logistics segment.
The subsidiary of the Atlântico Participações group signed, with São Luís Port Company SARL, of the China Communications Construction Company Limited (CCCC) group and with other minority shareholders holding 49%, a binding proposal for the acquisition of 100% of TUP Porto São Luis, company that owns a private use terminal located in São Luis (MA), for the amount of R$720 million.
In addition, also through Atlântico, Cosan signed a binding memorandum of understanding (MoU) with a company of the Paulo Brito Group, founder and controller of Aura Minerals (AURA33), for the formation of a joint venture for the exploration of ore iron, which should be shipped through the Port, under the name JV Mineração.
“This MoU predicts that Atlântico will hold 37% of the total capital and shared control of the new combined company, that is, 50% of the common shares, of the new combined company, after the contribution of Porto and cash, depending on capital calls by the company’s management, says the company.
According to the relevant fact, Cosan joins a strategic partner in a new line of business, contributing with its port logistics and management expertise. “JV Mineração will be an integrated mining and logistics company, which will own, in addition to the Port, exploration rights for mining assets in 3 mineral projects located in the State of Pará, with significant potential for iron ore reserves, to be transported by the Porto”, he points out.
With start-up scheduled for 2025, the first mineral project to be explored by JV Mineração is located near Paraupebas (PA), in the Carajás region, connected to the Port by the Carajás railroad. “The exploration will follow the highest environmental and safety standards, in line with the strategy of sustainable capital allocation, supported by the EESG principles of the Cosan group”, states the company.
The new Company will have Juarez Saliba de Avelar as CEO, an executive with experience in the Mining segment, having held leadership positions in companies such as Vale and CSN, among others. In addition, Julio Fontana, with experience in rail and port logistics, will be an advisor and senior consultant at JV Mineração.
Cosan will hold a public conference call with the market on Tuesday morning to present the transaction.
Itaú BBA pointed out that it awaits more information on the details of the transaction, but points out that the company is going to a different industry, albeit with a similar strategy to the one already used.
“Although transaction details are still very limited, we see three of Cosan’s main pillars [na operação]”, point out, which are listed below:
1. Big assets. The strategic port terminal with cheap rail access. The first point is that the São Luís terminal has a high strategic value due to its direct access to the Carajás Railroad (EFC). Analysts point out that logistics is an essential component of a mining project. In addition, Vale recently renewed the rail concession, including new competitive clauses regarding the right of access: analysts estimate a cost of R$ 18.64 per ton (or US$ 3.40 per ton) related to the right of access tariffs. passage for the 900 km stretch from Carajás to São Luis.
2. Combining capabilities. Cosan is notorious for combining supply and demand contracts within its business and, unlike the project being carried out by previous owners, the terminal will likely have a take-or-pay contract that will not only help with viability project, but should also play a key role in obtaining funding for the project (which would have been a problem for previous owners).
3. Experienced partners and management focus. The project, which includes the exploration of iron ore from three mineral projects in the state of Pará, will be a joint venture with Grupo Paulo Brito, already highlighted above as founder and controlling shareholder of Aura Minerals (AURA33). Regarding the company’s management, Juarez Saliba de Avelar – an executive with previous experience in the mining segment (Vale and CSN) – will be appointed CEO of the new company; Julio Fontana, former CEO of Rumo, will join the company as a board member and senior consultant.
At the moment, they point out, it is difficult to assess whether the project will be positive or not. “At this point, it’s not clear how much more the JV would have to invest to complete the project, or whether the original design will be retained. Added to this is the complexity of the project – including land use, cited in a recent report by Valor as the reason for the project’s delay – which may or may not have been resolved. A final point to be considered is the lack of details about the mining project and the expected costs and returns associated with its operations”, they assess.
Therefore, analysts still have a neutral opinion on the news, awaiting more details on the conference call. But they underscore Cosan’s excellent track record for capital allocation. “Although we cannot calculate the upside potential, our basic case is that it would not be destructive to value.” BBA analysts have an outperform recommendation (above average performance for the share), with a target price of R$30 per CSAN3 asset.
(with State Content)
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