ERG to start up Brazil iron ore mine as infrastructure projects progress

London — Kazakhstan-based diversified miner Eurasian Resources Group is set to start commercial production at its Pedra de Ferro iron ore mine in Bahia state, northeast Brazil, this month, the company said Dec. 18.

Initial production capacity at the mine, also known as BAMIN, will be 2 million mt/year of high-grade ore with a 65% Fe content, ERG said.

The mine is targeting a full production of 18 million mt/year, although the date for reaching this production level was not given.

BAMIN is ERG's first project in Brazil. The company currently produces iron ore and other minerals in Kazakhstan and non-ferrous metals in African countries.

Progress on the project has been delayed for years by lack of adequate infrastructure, as its viability is linked to the development of Brazil's FIOL (East-West Integration) Railway -- which has been at an initial stage for many years -- and new port facilities.

ERG's announcement follows the Dec. 16 announcement by Brazilian miner Vale that it will support development of FIOL by purchasing rails and railway ties for one of its sections.

This forms part of an accord with the Brazilian government by which Vale negotiated an early renewal of concession rights for its major Carajas and Vitoria-Minas railways in Brazil.

FIOL, seen as essential for developing industries including agriculture in Bahia -- one of Brazil's poorest states -- is to have an extension of 1,527 kilometers, with one of its sections designed to link the BAMIN greenfield mine site in Caetite to a port site at Porto Sul, Ilheus, Bahia state.

The Brazilian government recently announced that the Brazilian army will move ahead with construction of this partly-built railway.

Iron ore prices jumped to a nine-year high in December, on short supplies, particularly for high-quality grades, as steel demand continues to recover on government stimulus-backed infrastructure programs worldwide.

Work on the Porto Sul deep-water port complex on Bahia's Atlantic coast, development of which is also considered crucial for BAMIN's viability, is still at an initial stage, according to ERG. Carried out by the State of Bahia and BAMIN, the initial works focus on constructing the requisite infrastructure and access to the site, ERG said.

"The BAMIN project is expected to increase Bahia's economic relevance in Brazil by raising the state to the position of the country's third largest iron ore producer," ERG said.