Vale to Attain Annual Production Capacity of 460 Million Tons Iron Ore in 2017
06/27/2012| 08:06pm US/Eastern
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By Diana Kinch
SAO PAULO--Brazilian mining company Vale SA (VALE) may attain a production capacity of 460 million metric tons a year of iron ore by 2017, after completing its new Serra Sul and Serra Norte projects in the Carajas region of northern Brazil, Jose Carlos Martins, Vale's ferrous and strategies executive director said Wednesday.
Vale's iron-ore output currently amounts to 310 million tons a year from its north, south and southeast Brazil systems, Mr. Martins said. Serra Sul will add a capacity of 90 million tons a year, and Serra Norte 40 million tons a year by 2017, the executive told reporters on a conference call.
Vale announced earlier Wednesday it had gained a preliminary permit from Brazil's federal environmental authority to develop its Serra Sul project. The project involves an investment of around $8 billion on the mine and processing plant, and $11.4 billion on related rail and port infrastructure to accommodate shipment of the ore.
"This is the biggest private-sector project ever in Brazil," Vale Chief Executive Murilo Ferreira said on the call.
While Serra Sul is located in the Brazilian Amazon, in Para state, the mine will be built outside a nationally protected forest area, and its ore will be transported by conveyor belt rather than trucks, Mr. Ferreira said. This will allow a 77% reduction in fuel usage compared to traditional mining methods, he said.
Serra Sul will employ 30,000 people during its construction phase and generate 3 billion Brazilian reais ($1.45 billion) worth of purchases from local suppliers, according to Vale's CEO. The project virtually doubles the Carajas mine's existing 109 million tons a year of iron-ore output, and the doubling of the related rail facilities will also benefit grain farmers in Brazil's center-west region, Mr. Ferreira said.
Vale is also confident it may gain a clearer position within the next few months on progress in its Alpa joint-venture steelworks project, also in Para state, which will proceed when the government builds a waterway in the area, Mr. Ferreira said.
"We've already spent $300 million (on Alpa), the groundbreaking is complete and we're going to go ahead with it," he said.
Mr. Martins added that on July 17, Vale will start building its Companhia Siderurgica do Pecem steelworks project in partnership with South Korean steelmakers Posco and Dongkuk Steel Co. CSP is due to start production in the first half of 2015, producing 3 million tons a year of steel, mainly for its South Korean partners. Vale currently has a 50% stake in CSP but recently said it hopes eventually to reduce its participation in the venture.
Write to Diana Kinch at diana.kinch@dowjones.com
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