Mining giant Vale (NYSE:VALE) is having second thoughts about going ahead with its $4 billion Apolo iron ore project in southeast Brazil, which may be affected by the federal government's decision to create a nature reserve in the area.
The proposed Serra do Gandarela reserve, Reuters Brazil reports, aims to protect the aquifers that supply about 60% of state capital Belo Horizonte's water as well as feeding important rivers and Vale’s project area overlaps with the limits of the proposed reserve, which is expected to cover 35,200ha.
Apolo, located in the Minas Gerais state, involves building a new processing complex and railroad branch line to connect the operation to the Vitória-Minas Railroad (EFVM). It covers the municipalities of Caeté, Santa Barbara, Raposos and Rio Acima, and the environmental impact study (EIS) has already been submitted to state environmental regulator Supram.
José Carlos Martins, Vale’s head of ore and strategy, told Fox News last month the project was looking problematic and "rather expensive" as the Minas Gerais state government was "very concerned" on its eventual environmental impact.
However, in a statement sent to MINING.com, Vale said environmental studies for the Apolo Project were registered in 2009, "one year before the proposal to create a National Park at 'Serra do Gandarela', which was presented in 2010."
The company also said that "according to technical studies, the area of major influence of Apolo Project is not related to the points of water capitation for the Belo Horizonte Metropolitan Area."
Brazil's Chico Mendes biodiversity institute (ICMBio) has been leading talks with Vale and other mining companies over the size and limits of the reserve, as well as the possible impacts of their projects in the area. According to Reuters, the institute conceded 1,900ha to Vale from the original plan for the reserve.
"We opened space for Vale, but the company said it was insufficient," ICMBio analyst João Augusto Madeira was quoted as saying.
Vale's sources told MINING.com it had submitted a "a conciliatory proposal" to the environmental agencies, concerning the creation of Serra do Gandarela National Park.
"The company also presented a proposition of an environmental educational program, associated to an initiative to foment scientific research and ecological tourism in the region," says the statement.
Other Vale projects that may be affected by the reserve are Apolo Sul, the Baú mine and the Capanema mine reactivation.
Vale is the largest iron ore producer and exporter in the world.
Photo: View of the Unesco world heritage city of Ouro Preto in Minas Gerais, Brazil.