Bloomberg reported that MMX Mineracao & Metalicos SA, the mining company controlled by billionaire Mr Eike Batista, led the Brazilian Bovespa index after saying it will sell BRL 1.37 billion of new shares, reducing funding concerns for its flagship Serra Azul iron ore project.
MMX, based in Rio de Janeiro, gained 6.2% to BRL 3.95 at the close in Sao Paulo today after advancing 5.7% yesterday, the biggest 2 day increase since July 27th. The stock was the best performer on the Brazilian benchmark Bovespa index, which declined 1.1% today.
The company in a statement said that MMX will issue 348.9 million voting shares at BRL 3.92 each in a private placement, late yesterday. Batista, who controls MMX with a 46.4% stake, agreed to buy all shares not subscribed in the offer. Boosting capital may alleviate concerns about the funding of MMX's projects.
The analysts said that "The capital increase should put an end to funding concerns and project execution should now be the main theme to monitor. A more robust cash balance puts MMX in a better position to negotiate future agreements."
MMX is spending BRL 4.8 billion to expand its Serra Azul unit in Brazil's Minas Gerais state, where it expects to produce as much as 29 million metric tonne of iron ore a year. The stock slumped to the lowest since April 2009 last month as investors dropped mining stocks amid lower growth in China, the world's biggest consumer of industrial metals.