Vale says ERG Brazil mine investment still not adding up

Top iron ore producer Vale SA continues to weigh an investment in Eurasian Resources Group’s Brazilian mine project, but says it has not yet found a cost-effective way to develop it.

“The volume of ore available there alone does not justify the construction of the infrastructure that is needed in terms of railways,” chief financial officer Marcelo Bacci told reporters Friday. “We still haven’t been able to come up with an equation that makes this calculation work.”

The Bahia Mineração project, known as Bamin, needs an estimated 30 billion reais ($5.4 billion) investment to expand operations, build a port and finish a 527 kilometer (327 mile) stretch of railway.

The project has drawn interest from Brazil’s federal government, which has been trying to facilitate a deal that includes Vale, to help develop infrastructure in the region. Bamin is expected to produce as much as 26 million tons of iron ore once fully operational.

Making the project profitable partly would depend on finding a way to transport cargo other than just iron ore, Bacci said. Vale would only enter the asset along with other partners, he added.

(By Mariana Durao)

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