Vale considers expanding largest iron ore open pit in the world

November 15, 2018

Driven by China’s demand for high grade iron ore produced by its S11D iron ore project in Brazil, Vale has approached Brazilian officials about expanding the project that is already the largest open pit iron ore mine in the world.

The $14 billion mine located in the Amazon rainforest has not yet reached its projected capacity of 82 Mt/y (90 million stpy), the Rio de Janeiro-based company is considering increasing ore-processing infrastructure and the railway that hauls the steel-making ingredient to port, Brazil’s federal environmental agency Ibama said told Bloomberg in an email.

While the project isn’t scheduled to hit its 82 Mt/y (90 million stpy) capacity until 2020, China’s appetite for the mine’s low-cost, high-grade ore continues to grow. Vale is looking to shore up its position as the world’s leading producer of better quality ore just as Chinese steelmakers look to improve efficiency, reduce emissions, and comply with stricter environmental restrictions.

Vale’s initial plan had been to reach the mine’s peak capacity and then stay at that level, but demand for S11D’s ore might present an offer that can’t be refused. During a recent earnings call, Vale Chief Executive Officer Fabio Schvartsman said the company was mulling an expansion that, if approved, would have “minimal” costs and be done “in a very short period of time.” Schvartsman said Vale would let the market know its plans in December.

Touted as the industry’s biggest project, S11D began shipments in 2017 and produced about 20 Mt (22 million st) in its first year.

Prices for higher grade ore with fewer impurities have soared above benchmark prices, and with S11D ramping up, nearly 80 percent of Vale’s sales are now considered premium products. The miner is also blending high-grade ore with lower quality material as a way of boosting revenue.

While licensing for S11D took nearly a decade, approving an expansion should be quicker even considering Brazil’s notoriously arduous permitting process.

“The question is to review the size of the expansion and impacts,” said Alexandre Sion, a legal expert in mining licensing. "A smaller plan would obviously be smoother to complete. It’s the new greenfield projects that are a lot more complicated.”


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