MercoPress. South Atlantic News Agency

Brazil’s mining giant buys stake in controversial Amazon dam project

“Avatar” director James Cameron is one of many against the Amazon dam

Brazil giant mining corporation Vale SA, in which the government has a dominating stake position, agreed to buy a stake in a controversial hydro-power project in the Amazon and invest about 2.3 billion Real (1.5 billion USD).

Vale, the world’s second-largest miner by market value, said in a regulatory filing its board approved buying as much as 9% of Norte Energia SA, which will build and operate the Belo Monte dam, from Gaia Energia & Participacoes SA.

The deal comes less than a month after Vale said it would replace Chief Executive Officer Roger Agnelli amid criticism from Brazil’s government, (which has direct and indirect stakes), that it wasn’t doing enough to help generate jobs.

The 25.8 billion-Real dam, which will flood 516 square kilometers of the world’s largest rainforest, is a key piece in the government’s plan to increase energy supplies. Once finished the Belo Monte complex will be the world’s third largest operational dam.

Vale, which failed in a previous bid to buy a stake when the rights to Belo Monte were auctioned last year, joins state- controlled Centrais Eletricas Brasileiras SA as a partner in Norte Energia. Eletrobras, as South America’s largest utility is known, and two of its units hold a combined 49.98 percent, according to its website.

Vale has stakes in other hydroelectric dams in Brazil.

The Organization of the American States requested April 5 that Brazil suspend work on Belo Monte. The OAS echoed protests of “Avatar” director James Cameron, former U.S. President Bill Clinton and former California Governor Arnold Schwarzenegger, who gathered in the Amazon city of Manaus earlier this year to voice concern about the potential environmental impact from the dam. The project will require the relocation of about 1,000 Indians.

Vale announced April 5 that it named Murilo Pinto de Oliveira Ferreira to take over as CEO in May after Agnelli’s mandate expires. Vale has underperformed Brazil’s Bovespa index and BHP Billiton Ltd., the world’s biggest mining company by market value, since mid-January amid concern the government would seek to play a bigger role in management decisions.

Vale plans to finance about 75% of its investments in Belo Monte, estimated at 2.3 billion Real, Vale Marketing Director Jose Carlos Martins said Wednesday on a conference call with journalists. Brazil’s national development bank, known as BNDES, will provide most of the financing, he said.

The investment will eventually allow Vale to generate about 73% of its own energy needs, Energy Director Almir Rezende said on the same call. The project will provide Vale with 400 megawatts, he said.

“Vale is a large consumer of electricity and invests in generation assets based on its consumption needs,” the company said in yesterday’s statement. Vale is “seeking to reduce operating costs on a permanent basis and minimize price and supply risks.”