MercoPress. South Atlantic News Agency

Brazil leading mining corporation reassessing its long term iron-ore reserves

Vale Ferrous and strategies executive director Jose Carlos Martins

Brazilian leading mining company Vale SA is “facing one of the toughest periods in our history as far as reserves are concerned,” a company executive said Thursday.

“We're experiencing some decline in reserves, a fall of 0.5% a year on iron ore contents,” ferrous and strategies executive director Jose Carlos Martins told analysts on a conference call.

Together with oil giant Petrobras, Vale SA are the two largest Brazilian transnational corporations.

When Vale opens new mine capacity in the north of Brazil the situation will improve and iron ore quality could actually rise in the long term, he said. The company will have more higher-quality iron ore from the north to blend with the lower-quality ore from its southern system where some mines are now depleting, Martins said.

“Our logistics strategy is based on this blending in the long term to keep ore quality stable,” Martins said. “We don't believe our average [iron] content will fall in the long term--it could actually rise. We will drill according to our needs.”

In 2013 Vale plans to bring to production an additional 40 million metric tons a year from its high-quality Carajas iron ore mine in north Brazil in a 2.9 billion dollars investment. The company hopes to gain licensing from Brazil's Para state authorities for a major new 90-million-tons-a-year mine at Serra Sul in Carajas, which could start producing in late 2016 in an 8 billion investment.

In its southern Brazil system, Vale is investing around 4 billion dollars in concentration plants to start up in 2013 and 2014 to improve the quality of southern-system ore in mines that are being depleted. “The quality could go back to 62%-65% iron content, comparable to the original Vale quality,” he said.

Vale's policy is to have the equivalent of 20 to 30 years production as reserves, the director said.

Vale's 50-million-tons-a-year high-grade iron ore project in Guinea is meanwhile under discussion following introduction of a new mining royalty law which makes the West African nation a less attractive place to invest, according to Vale chief executive Murilo Ferreira.

Another iron ore mine project in southeast Brazil, Apolo, is looking complicated and “rather expensive” as the Minas Gerais state government is “very concerned” on its possible environmental impact, including in the logistics area, the CEO said.