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Billion-dollar iron ore project comes to life with support from Vale and PAC, boosting the economy and bringing new opportunities to the industrial sector in Brazil

Written by Deborah Araújo
Published 14/10/2024 às 12:30
Billion-dollar iron ore project is finally getting off the ground with support from PAC and Vale
Photo: DALL-E

With investments of more than R$30 billion, the Bamin industrial complex promises to transform iron ore production in Bahia, driven by the new PAC and Vale's entry into the project.

A billion-dollar project involving iron ore production in Bahia, which has been under discussion for over a decade, is finally gaining traction. This colossal undertaking, launched during Lula's second term and of great interest to the state's PT administration, involves Bahia Mineração (Bamin) and has the support of the federal government to become a reality. With an estimated investment of R$30 billion, the project could transform the region's iron ore sector. Let's learn more about this major project, Vale's involvement and how the new PAC is helping it finally come to fruition.

A billion-dollar project that promises to move millions of tons of iron ore and boost Bahia's economy

The billion-dollar iron ore project of Bahia Mineração (Bamin) involves three main parts: the Pedra de Ferro mine, located in Caetité (BA); a section of the Oeste-Leste (Fiol) railroad; and a port terminal in Ilhéus (BA). The combination of these three elements is essential for the success of the project, which promises to move millions of tons of iron ore and boost the region's economy.

This logistics corridor, which connects the interior of the state to the coast, is considered a strategic project for the federal government. It will not only accelerate the flow of iron ore production, but it can also boost the transportation of grains and other products, creating new economic opportunities for Bahia.

What is Vale's role in the project?

One of the major highlights of this billion-dollar iron ore project is Vale's interest. The mining giant is in negotiations to acquire a stake in the Bamin project, which is currently controlled by Eurasian Resources Group (ERG), a group based in Luxembourg. Vale is studying the acquisition of the Bahian mining company together with Cedro, a medium-sized mining company from Minas Gerais, and BNDESPar, the investment arm of the National Bank for Economic and Social Development (BNDES).

Vale’s entry into the project could be a game-changer, as the mining company has the know-how and financial resources to transform the project into a world-class operation. The high-quality iron ore extracted from the Pedra de Ferro mine is of great interest to the mining company, which is seeking to expand its supply of “green ore,” a category of iron ore with a lower environmental impact that is in high demand in the global market.

The PAC and the federal push for the billion-dollar iron ore project

The new Growth Acceleration Program (PAC) has been a major driver of progress for this billion-dollar iron ore project in Bahia. The relaunch of the PAC, a hallmark of the PT administrations, came with the promise of unlocking essential projects and boosting economic development in several regions of Brazil, and the Bamin project is one of the big bets.

In September, the federal government announced a R$4,6 billion loan from Merchant Marine Fund (FMM) for the construction of the port terminal in Ilhéus. This investment is one of the key pieces for the project to move forward and for the iron ore produced in Caetité to be transported efficiently.

Additionally, the PAC has already allocated R$1,5 billion for the construction of the first section of the Oeste-Leste (Fiol) railway, which will connect the Pedra de Ferro mine to the port in Ilhéus. This project is considered a priority by the Lula government and should be completed by the end of 2026, according to statements by the president himself.

An investment of up to R$32 billion will be required for the industrial complex to operate

Although the project is gaining momentum, there are still many challenges ahead. The main obstacle is the high volume of investment required to complete the works. It is estimated that between R$27 billion and R$32 billion will be needed for the Bamin industrial complex to operate at full capacity. To attract these resources, the company is seeking to structure long-term financing with interest rates below the market, in addition to negotiating the sale of a stake in the company.

Another crucial point for the success of the project is the need to increase the production capacity of the Pedra de Ferro mine. The current forecast is that the mine will produce 26 million tons of iron ore per year, but to make the return on investment viable, this capacity may have to be increased to 40 million tons per year.

Despite the challenges, federal support, especially through the PAC, and the involvement of large companies such as Vale, bring good expectations for the billion-dollar iron ore project to become a reality in the coming years.

A project that will transform Bahia's economy

The billion-dollar iron ore production project in Bahia is one of the largest ongoing projects in Brazil and has the potential to transform the state's economy. With the support of the PAC and the interest of giants such as Vale, the expectation is that the project will finally get off the ground and begin to generate the positive impacts that the government and the population expect.

Bahia Mining, with its Pedra de Ferro mine, the Oeste-Leste railway and the port in Ilhéus, could become a major player in the iron ore sector in Brazil. And with the global market increasingly focused on sustainable solutions, the high-quality iron ore produced by Bamin could put Brazil in a prominent position on the world stage.

Now, all that remains is to follow the next steps and hope that all the necessary negotiations and financing come to fruition, allowing this billion-dollar project to truly change the game for Bahia and the country.

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Deborah Araújo

I write about renewable energy, automobiles, science and technology, industry and the main trends in the job market. With a close eye on global developments and daily updates, I am dedicated to always sharing relevant information.

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