MercoPress. South Atlantic News Agency

BHP Billiton plans to invest heavily in Brazilian iron ore extraction

Ferrous was founded by Australian Gordon Toll with over forty years in mining

BHP Billiton , the world's biggest miner, is close to launching a £2-billion-pound bid for Brazilian iron ore miner Ferrous Resources, the Sunday Times reported. The newspaper, without citing sources, said talks between BHP and Ferrous Resources started earlier this year and had stepped up in recent weeks.

Another option was for BHP to take a stake in Ferrous Resources rather than launch a full takeover it cited unidentified sources as saying.

Ferrous Resources abandoned a London flotation last year that would have valued it at over 3 billion dollars.

According to the report said Ferrous was controlled by a number of international hedge funds headed by Philip Falcone's Harbinger Capital.

Ferrous needs to spend about 5bn dollars developing its Viga mine in Minas Gerais state in Brazil, which would include a 400km slurry pipe to carry the ore to its own port at Presidente Kennedy in nearby Espirito Santo state.

Ferrous was founded by Gordon Toll, who has also variously chaired Fortescue Metals Group, Ivanhoe Mines and the ill-fated Compass Resources. Educated originally in Queensland, 63-year-old Mr Toll has about 40 years' mining experience, including executive roles with RTZ and BHP.

Mr Toll, who resigned from Ferrous in mid-2010, founded the company in 2007 to buy concessions in Brazil's “Iron Quadrangle” in the Minas Gerias state, which is regarded as the world second-biggest iron ore province after the Pilbara.

Harbinger, the biggest shareholder in Ferrous, with 26%, was a key backer of Andrew Forrest's Fortescue. The second-biggest holder is TPG, formerly Texas Pacific Group, with about 8%.

According to the weekend report, Ferrous hired Deutsche Bank to find a buyer or partner after the listing fell through, and BHP started negotiations earlier this year after an unnamed Chinese company made a conditional offer for Ferrous.

It stated that BHP was interested but at a lower price than the £ 2.2bn asking price. BHP has been increasing its presence in Brazil in recent years, with a 50% interest in a pellet plant at Samarco with the world's leading iron ore exporter, Brazil’s Vale.