Protecting its territory: Vale acquires mining company in West Africa

Vale announced yesterday its acquisition of a 55% stake in iron ore mining company BSG in Africa for US$2.5bn. The company is located in Guinea, in Western Africa.  Is this a smart move?

Iron ore prices  are high again and this could attract newcomers  such as BSG. Apparently, Vale is neutralizing  newcomers, which is apparently what it is doing.

Vale is the second largest diversified mining company in the world. With an expressive international presence, the company has operations in the 5 continents.

BSG is considered a dangerous newcomer, and the region where the mines are located has iron ore of high-quality. In this scenario, spending US$2.5bn to prevent it from storming into the market is a good deal, according to Raphael Biderman, analyst at Bradesco Corretora, in Sao Paulo.

Raphael also says that despite buying only 55% of BSG, Vale will have offtake of all the production, so it will be able to control how this newcomer affects the global seaborne market.

BSG has two other important advantages to Vale; first, it has logistics and second, it would reduce political risk in Africa.

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About Hildete Vodopives

Hildete de Moraes Vodopives is founder of Brazil Global and of the Harvard Strategists Bureau. She is a member of the Brazilian Investment Analysts Association (APIMEC-Rio) where she served as Corporate Relations Director and later, on the board. Hildete advises companies doing business in Brazil. She lives between Paris and Rio and is a member of the Harvard Club of Paris and of the Mercosur Women’s Forum.
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