UPDATE: Brazil LLX: Ternium To Start Building Acu Mill In '11

Brazilian port developer LLX Logistica SA (LLXL3.BR) said Friday that Latin American steelmaker Ternium SA (TX) will start building a new steel mill at LLX's Acu port in Brazil in the second half of 2011.

A public hearing for construction of the steel mill with a projected production of 5.6 million metric tons a year at Acu in Rio de Janeiro state is set for June, representing "a major step in the licensing process in Brazil," LLX Chief Financial Officer Leonardo Gadelha told analysts during a conference call.

Within 45 to 60 days after the hearing, the project will gain its preliminary environmental license and, within 60 days after that, its construction license, according to Gadelha.

"Construction will start in second half 2011," he said during the call.

The Ternium steel mill plant is one of two integrated steel-mill projects slated for Acu port. The second, a five-million-tons a year slabs project by China's Wuhan Iron & Steel Co. (60005.SH), or Wisco, is still in the study stage.

Ternium, the Latin American steelmaking arm of Techint Group, had no immediate comment on the timetable for its Acu steel project when approached by Dow Jones Newswires. According to recent reports, the Brazilian mill may produce steel slabs for use in Ternium's steel-processing facilities in Mexico.

Acu port is due to start operations in the second half of 2012 in a 3.4 billion Brazilian reais ($2.12 billion) investment. The port's iron-ore export pier is 70% complete, Gadelha said. The port will export iron ore from Anglo American PLC's (AAL.LN, AAUKY) Minas-Rio mine operation, which is also under development.

Earlier this month, LLX signed up with Brazilian bank Bradesco SA for a short-term BRL470 million bridge loan to keep up the pace of development at the port site until the company signs up for a bigger longer-term financing deal with Brazil's state-owned BNDES development bank, probably in a year's time, Gadelha said during the call. LLX currently has BRL750 million in cash to prepare the port for operations, he said.

The port will eventually be able to handle up to 350 million tons a year of cargoes including iron ore, steel and oil products, Gadelha said. This is higher than originally expected following the approval by environmental authorities of inland channel port facilities at the site in southeast Brazil.

The port, with 40 berths and more than 17 kilometers of quayside, will house a shipyard operated by LLX's sister company, OSX SA, and a power plant operated by another sister company, MPX Energia SA (MPXE3.BR). The companies are all controlled by Brazilian billionaire Eike Batista.

LLX also has a license to process oil at Acu that may come from another sister company, OGX Petroleo SA (OGXP3.BR) or other oil-producing companies. LLX has a license to process 1.2 million barrels a day of oil which could be expanded and is negotiating processing contracts with three major oil companies at present, Gadelha said.

-By Diana Kinch, Dow Jones Newswires; 55-21-2586-6086; [e-mail]