BHP and Vale give OK for $3.2bn Brazil expansion

May 2, 2011

BHP Billiton and Brazil's Vale have given the go-ahead for a $US3.5 billion ($A3.2 billion) expansion of their jointly owned Samarco iron ore pellets operation in Brazil.


The expansion will increase Samarco's annual iron ore pellet production capacity by 8.3 million tonnes to 30.5 million tonnes.

The cost of the expansion is higher than the $US2.86 billion originally flagged. And first production of the high-value steel-making raw material is now expected in the first half of 2014 compared with the original target of late 2013.

Advertisement: Story continues below The expansion project involves building additional mining capacity and a third concentrator at the Germano mine, a third (400-kilometre) slurry pipeline and a fourth pellet plant/upgraded ship loading capacity on the coast.

BHP Billiton president of iron ore Ian Ashby said Samarco was a low-cost supplier of iron ore pellets and during the past several years had increased its iron ore resource base.

''This investment builds on its resource and operational strengths and will further improve Samarco's competitiveness and market position,'' Mr Ashby said.

This follows Samarco's most recent expansion, which was completed just ahead of the September 2008 start to the global financial crisis. Samarco responded to the slump in demand by slashing production, leaving only the new (third pellet plant) on line.
Demand has rebounded strongly, reflected in seaborne trade in iron ore pellets fetching more than $US200 a tonne.
Samarco is one of many expansions that BHP has said would consume up to $US80 billion in capital expenditure in the next five years.

The big-ticket items for the group remain the expansions at its Pilbara iron ore operations and the Olympic Dam copper/uranium/gold project in South Australia.