Azucar Minerals Ltd T.AMZ

Fertilizer: Its not only about what you think you

[topdop]

Analysts at BMO and RBC are reporting that Vale S.A. is in negotiations to acquire Fertilizer Assets for US$3.8B.

AMZ management know what they are doing and this is the catayst that they need to surf on to propel the stock to new heights (rather than simply drill results). Let's see how it unfolds; and yes, I've just ensured that this has been delivered also to Pescod and Kaizer.....just my opinion is all,
topdop

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(VALE-NYSE) Market Perform; Price - US$30.85; Target - US$30.00 
Impact: Mixed
Vale S.A: In Negotiations to Acquire Fertilizer Assets for US$3.8B (Flash)
(VALE-NYSE) Market Perform; Price - US$30.85; Target - US$30.00
Impact: Mixed
Vale announced it is in negotiations with Bunge Group in Brazil to acquire its fertilizer 
assets, including a 42.3% equity interest in Fosfertil S.A., for US$3.8B maximum.  Bunge 
Group is a global agribusiness and food company, and the largest South American seller of 
fertilizer. Bunge Group’s assets would add to Vale’s existing fertilizer portfolio, which 

includes the Bayovar phosphate project in Peru (production expected H2/10), Rio Colorado
potash project in Argentina, other projects in South America and a greenfield potash 
project in Regina, Canada.  BMO Research notes that the Bunge assets produce phosphates and
nitrogen fertilizer products rather than the more desirable potash.  It is unknown when 
the conclusion of such a transaction might take place.  Interestingly, the move highlights 
the attraction that fertilizers hold for the world''s largest two miners, BHP Billiton
(BLT-LSE, Outperform) and Vale, as the sector is a key focus for both.  The entry of the
two with market caps of US$200 billion and US$150 billion, much larger than current 
players, may or may not change the dynamics of the market going forward, depending upon 
how their plans progress.  Vale is scheduled to release annual financial results after 
market close on February 10, 2010.   
Tony Robson (416) 3xx-xxxx


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RBC CAPITAL MARKETS EQUITY RESEARCH -
First Glance
January 15, 2010
 
Vale S.A. (NYSE: VALE; 30.85; NYSE:
VALE.P)
 
Negotiating To Buy Fertilizer Assets
 
Rating: Sector Perform
Risk: Average Risk
 
* Vale announced today that it is negotiating to acquire the fertilizer assets
of the Bunge Group in Brazil. The company stated that the transaction price 
shall not exceed US$3.8 billion.
* The Bunge fertilizer assets include phosphate rock mines and processing 
plants of intermediate fertilizers based on phosphorus (phosphates) and 
nitrogen (ammonium nitrate and urea).
* Strong balance sheet can easily support acquisition
* Fertilizer acquisition fits with company strategy
 
Impact
 
Neutral
 
First Impression
 
* Vale is in negotiations to acquire fertilizer assets for approximately 
$3.8 billion: Vale announced today that it is negotiating to acquire the 
fertilizer assets of the Bunge Group in Brazil, including its 42.3% equity 
stake in Fosfértil S.A. The company stated that the transaction price shall 
not exceed US$3.8 billion. The conclusion of the negotiations is subject to 
corporate approval of the companies involved and the approval of governmental
regulatory agencies.
 
* Asset details: The Bunge fertilizer assets include phosphate rock mines and
processing plants of intermediate fertilizers based on phosphorus (phosphates)
and nitrogen (ammonium nitrate and urea).
 
* Strong balance sheet can easily support acquisition: Vale has cash and cash
equivalents of $13.0 billion, and a net debt/total capitalization ratio of 
only 10.0%. Vale can easily afford an acquisition of this size.
 
* Fertilizer acquisition fits with company strategy: Vale has emphasized in 
the recent past its positive outlook for fertilizer and its enthusiasm to 
expand its business in this area. Also, buying Brazilian rather than foreign
assets is politically more palatable, particularly since it is an election 
year in Brazil.
 
* Investment Rationale: Iron ore remains the key. Vale is the largest and 
lowest cost iron ore producer in the world, with an unparalleled resource base 
in Carajás and enormous expansion potential, in our view.
 
Nickel provides diversification and growth but the commodity outlook remains
uncertain, and labour issues remain unresolved at Sudbury and Voisey's Bay.
In aggregate, the remaining businesses are largely immaterial to the 
near-term outlook. Rebounding European iron ore demand should lead to a 
significant recovery in EPS and is quite positive for Vale over the next 
6 months. At the same time, a struggle for market share could develop in 2010,
which could constrain pricing. At this point, we believe much of the 
expected improvement is already reflected in the share price.
 
All values in USD unless otherwise noted.
Priced as of prior trading day's market close, EST (unless otherwise stated).
For Required Non-U.S. Analyst and Conflicts Disclosures, please see Required 
Disclosures section at the end of this comment. For full Comment, please see
attached document.
 
RBC Dominion Securities Inc.
H. Fraser Phillips (Analyst) (416) 8xx-xxx9; [e-mail]


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