MercoPress. South Atlantic News Agency

Uruguay disappointed with Indian group downgrading iron-ore project priority

CEO Fernando Puntigliano said Zamin Ferrous was surprised by the degree of political discussion on the project

The Uruguayan government was taken aback by the announcement that the Indian iron-ore mining group Zamin Ferrous has decided to downgrade the priority of its several hundred millions dollar project in Uruguay from position one to four.

The Aratirì project General Manager in Uruguay, Fernando Puntigliano said on Tuesday that the priority downgrading in the agenda of the international corporation was motivated mainly because of the ‘political discussion’ triggered by the project in Uruguay and the fact it was falling behind the original schedule.

Zamin’s project is to exploit an open pit magnetite iron ore deposit in the centre of Uruguay, Valentines under the name of Minera Aratiri which includes a 215 km slurry pipeline to transport the ore to a port to be built in prime ocean coast. Allegedly there is potential for resources to reach in excess of 5 billion metric tons, according to the company’s statement. Final investment could exceed a billion dollars.

However environmentalists and farmers question the open pit mining and the pipeline and the location of the sea terminal.

“The project is not over, but it ceased to have the speed originally planned. There are things that according to the corporation’s criteria were scheduled such as the import of machinery and equipment and other procurement which will be stopped. Those funds will be invested in other projects and now we will wait until all documents are presented so as to keep advancing”, said Puntigliano interviewed by a Montevideo broadcasting station.

This in practical terms means that the initial planned investment will be reduced “between 50% and 70%”, although they will be later recovered as the project advances. Zamin Ferrous made the decision last Sunday to express its disappointment with the political debate the project had triggered in Uruguay.

“I feel a bit frustrated. I’m surprised at the political discussion the issue has originated which is very technical and should have been discussed with all the elements on the table. I tried to explain the corporation’s executives that Uruguay has its own tempo to absorb new situations”, admitted Puntigliano.

The decision was informed to Uruguayan Industry, Energy and Mining minister Roberto Kreimerman who was in charge of communicating President Jose Mujica.

President Mujica said he felt “disappointed” with the decision and blamed the opposition for all the “political cackling” over the project which naturally makes investors “fearful”.

But opposition Senator Francisco Gallinal recalled that it was President Mujica who went as far a to suggest a non-binding referendum on the issue to appease environmentalists and Senator Jose Amorin Batlle said that “political discussions” on issues of this nature are “normal and healthy”, and remembered that the ruling coalition when in the opposition systematically ‘opposed foreign investment and foreign investors’.

Puntigliano said that in the meantime Zamin will continue with all the paper work pending including several environmental impact assessments. “The company is not leaving, we will continue to work” although all the technical field staff will be moved to another project in another country.

“Mining staff are hard to come by, so we are not letting them go but rather have them working in other projects”, added Puntigliano who underlined he fully trusted Uruguay’s Environment Office, Dinama, “and we must have a good relation: we’ll be working together for the next ten years and full trust is essential”.

Regarding the one billion dollars earmarked for the project Puntigliano said they will be “re-directed” to other Zamin projects. “It’s hard to have a billion dollars ‘parked’ and not invested. In Africa there are 15 iron ore projects to develop in the next few years, similar to the one in Uruguay. It’s rational then to re-list priorities”.

Finally Puntigliano said that the possibility of a partnership with the Uruguayan state as was proposed a week ago by President Mujica, a 50/50% association is “welcome”. All private companies in Uruguay “like to have the state as a partner and as General Manager I say welcome to the proposal”.

“Having a partnership benefits both sides, improves efficiency and makes long term decisions more viable”, he added.

According to the company’s website Zamin Ferrous is an international group registered in Jersey with offices in London, Sao Paulo, Montevideo and Switzerland and has world-class portfolio of iron ore projects primarily in Latin America. The Company's strategy is to become a leading supplier of blast furnace and direct reduction iron ore pellet fines to the global steel industry.

Zamin has a five-year history in mining and trading and has invested almost 250 million dollars to date in its projects. There are two development and exploration assets - Valentines (Uruguay) and Greystone (Brazil) - with just under 1.3 billion tons of JORC compliant resources and a further 1.3 to 3.3 billion tons of potential resources.

Zamin's 50% stake in the Bamin project - a 50:50 JV with ENRC (*) - was sold to ENRC in September 2010 for 735 million dollars.

Zamin Ferrous was founded by Mr. Pramod Agarwal, who has over thirty years experience in the global commodities business. The company was founded as a direct consequence of the lack of available iron products to be sourced by steel companies or traders in one of the richest iron hosting regions on earth.

At the heart of Zamin's Strategy is its proven ability to partner with regional and federal governments to develop assets and clearly defined infrastructure and logistics solutions.

The marketing strategy of Zamin Ferrous is to sell its product as blast furnace and direct reduction iron ore pellet fines to steel customers in key global steel region.

(*) ENRC, Eurasian Natural Resources Corporation is the sovereign fund of the former Soviet Asian republic of Kazakhstan.