MercoPress. South Atlantic News Agency

Uruguay’s definitive iron-ore feasibility project to be completed by mid-2011

Swiss-based iron ore mining start-up Zamin Ferrous through its Brazilian affiliate is finishing the drilling stage of an iron-ore project in Valentines, Uruguay, and expects to complete its “definitive” feasibility study by mid-2011.

The deposit, located about 250 kilometres north-east of Montevideo, “may require an investment of 2 billion US dollars and has ‘strong support’ from Uruguay’s President, Jose Mujica”, said Martin Kannengister a corporate director with Zamin.

Its expected operating cost is 21 US dollars per ton, about a third of Zamin’s long-term “conservative” assumption of iron ore selling prices of between 55 and 60 USD per ton, Kannengieser said.

Zamin may be valued at 2 billion to 2.5 billion, the Financial Times reported July 24, citing an unidentified banker familiar with the company. That’s an “external” valuation that Kannengieser said he considers “reasonable”.

In Brazil Bahia Mineracao Ltda, a mining company controlled by Zamin Ferrous and Eurasian Natural Resources Corp., is seeking 1.4 billion USD of loans from Brazilian banks to finance an iron-ore project in the country’s northeast.

Brazil’s state development bank will likely be the lead lender, Kannengieser said in an interview at Zamin’s London offices. Regional banks such as Banco do Nordeste do Brasil SA will likely provide finance alongside the development bank, known as BNDES, he said.

“The view is that we can raise about 1.3 or 1.4 billion USD there and the rest we would have to borrow through equity,” Kannengieser said, adding talks with the banks are continuing.

Bahia Mineracao is investing 1.8 billion USD in the Pedra de Ferro project in Bahia state to produce 19.5 million tons of iron ore concentrate by 2013. Latin American mining companies and steelmakers may invest a combined 100 billion USD during the next five to 10 years to supply growing steel and fertilizer demand, Bank of America Corp. said in a report last week.

“There is a lot of financing just available in the country,” Kannengieser said. “We very likely don’t need to go anywhere but Brazil”.

London-listed Kazakh ENRC bought 50% of Bahia Mineracao for 300 USD million in 2008. Zamin's founder and Chief Operating Officer is Pramod Agarwal.