Brazil's Gerdau eyes iron ore sales, IPO possible

Tue May 31, 2011 3:32pm GMT

* Wants to "monetize excess" ore not used for steel
* Options could include IPO, off-take agreement

RIO DE JANEIRO May 31 (Reuters) - Brazilian steelmaker Gerdau (GGBR4.SA: Quote) could begin selling iron ore that it will not need for its steel production, a move that may include an initial public offering of a separate unit, Gerdau's chief financial officer said on Tuesday.

The soaring price of iron has led steelmakers such as Sao Paulo-based CSN (CSNA3.SA: Quote)(SID.N: Quote) to consider spinning off their iron ore assets to take advantage of soaring demand from China and bring value to shareholders.

Gerdau's CFO, Osvaldo Schirmer, said the company expects its total resources of iron ore in Brazil will be more than the company needs for its steel mills.

"There's going to be a lot of ore left over, we have to consider the best way to exploit that excess," Schirmer said during an investor conference in Rio de Janeiro.

He said the company would spend the next six to nine months studying how much iron ore would be available to sell, and then decide what sort of investment options it would explore to develop them.

"There are a lot of options -- a partnership, an IPO, an offtake agreement for the production of the mine, (or) someone who pays up front for a guarantee of future production for 15 or 20 years," said Schirmer.

Additional considerations include development of logistics to transport the iron ore for export and the availability of port capacity, he said.

Gerdau is Brazil's largest producer of steel for the construction industry and has operations throughout the Americas and in Spain.

(Reporting by Brian Ellsworth, editing by Dave Zimmerman, sourced Thomson Reuters)