HomeBase MetalsVale spends US$2.5 billion on Guinea iron ore deposits

Vale spends US$2.5 billion on Guinea iron ore deposits

The Simandou iron ore
project in Guinea
Conakry, Guinea — MININGREVIEW.COM — 03 May 2010 – Brazilian mining giant Vale has purchased a majority stake in a division of mining company BSG Resources in Guinea, spending US$2.5 billion (R18.75 billion) to tap what it calls “among the best deposits of iron ore in the world.”
Reuters reports from here that the move is significant for Vale, the world’s largest iron ore miner that is aggressively seeking opportunities in Africa, and for Guinea, where a political crisis has largely discouraged major foreign investment.

“Guinea will be a player on the world iron market within four years and could be the No. 3 producer in six years,” mines minister Mahmoud Thiam said here. “This decision will also kick-start other mining projects in Guinea.”

“The acquisition will give Vale access to properties with high-quality iron reserves that include the Simandou South property known as Zogota, as well as exploration blocks Simandou North 1 and 2,” Vale said.

“Output will begin in 2012 with 10 million tonnes of iron ore and reach 50 million tonnes by 2015,” the company added.

It said it would pay US$500 million (R3.75 billion) up front for a 51% stake in BSG Resources (Guinea) Limited, and the remaining US$2 billion (R15 billion) in subsequent payments over an unspecified period.

“This project is yet another indication of Vale’s bullish views on the longevity of the iron ore pricing cycle, and the structural iron ore story,” Barclay’s capital analysts said in a research note, adding: “Given the massive infrastructure requirements, we are sceptical on the time-to-market of these projects.”