Brazilian BAMIN iron ore mine to raise output to 26 mil mt/year in 42 months: ERG CEO

Bahia Mineracao (BAMIN)’s Pedra de Ferro high-grade iron ore mine in northeast Brazil is to raise its output to 26 million mt/year within 42 months, with the potential to become Brazil’s third largest iron ore exporter, Benedikt Sobotka, CEO of developer Eurasian Resources Group said in an interview.

The project — which produced 1 million mt in 2021 — had previously announced a target production of 20 million mt/year by 2026, with expectations of shipments of 18 million mt in that year.

However, diversified miner ERG’s successful bid last year for a Brazilian federal government concession to finish building and to operate the first stretch of Brazil’s East-West Integration (FIOL) railway will facilitate the project’s emergence as a low-cost producer at a higher capacity rate. The railway will link BAMIN’s mine site to an export port at Porto Sul, Ilheus, Bahia state.

Construction of the 537-km stretch of FIOL should be completed in 18 months, as it is already 75% built, Sobotka told S&P Global Platts. The railway and port will also be used to ship agricultural goods and liquid bulks.

Pedra de Ferro, located in Caetité, Bahia state, started commercial operations last year and is currently producing high quality hematite direct-shipping iron ore (DSO) with an average of 65% Fe content, in the form of fines and lumps.

Export market demand for high-grade iron ore is currently high, as its usage can help lower the quantities of coking coal used in blast furnaces, thus reducing emissions.

The plan is now to expand production to 10 million mt/year of DSO and add 15-16 million mt/year of high-grade concentrate and pellet feed, predominantly for direct reduction pellet feed (DRPF) plants, said Sobotka. The concentrate and pellet feed will have an average 67%-68% Fe content.

“Similar projects have encountered significant delays from licensing. With the BAMIN licensing process underway since 2008 we are in the privileged position of having all material licenses in place,” Sobotka said.

BAMIN should eventually be Brazil’s third biggest iron ore exporter after Vale and CSN, and with an operation roughly the size of Anglo American’s Minas-Rio in Minas Gerais state, Sobotka said. Minas-Rio produced 22.94 million mt of iron ore in 2021, Anglo reported Jan. 27.

BAMIN’s C1 product cash cost on the ship (FOB) in Brazil should be $20/mt after the railway is completed, Sobotka said.

Seaborne iron ore prices shot up Jan. 28 on a positive mid-term demand outlook. Platts assessed the 62% Fe Iron Ore Index at $147.90/ dry mt CFR North China Jan. 28, up $9.15/dmt from Jan. 27: however this slipped back to $141.75/dry mt Jan. 31 on lower market liquidity as China entered its Lunar New Year holiday.

Platts assessed the 65% Fe North China Index at $171.75/dry mt CFR North China Jan. 31, maintaining the spread between the 65% and 62% Fe iron ore indexes at $30/dmt.

Customers
The increasing focus by European steel mills’ end-customers on the full carbon footprint of their materials has made BAMIN’s product attractive to the region, according to Sobotka.

The company currently sells about 1 million mt/year of 65% DSO on the spot market to customers in Asia, Europe and South America. In the future, the DRI pellet feed could be designed to certain specifications for certain Middle East steelmakers as well as for longer-term contracts, he said.

While Pedra de Ferro will have a life of mine of at least 30 years, it is possible this could reach an additional 30 or 50 years as exploration and drilling is still proceeding in this area, which is a geological extension of the rich deposits of the iron ore triangle of Brazil’s Minas Gerais state, Sobotka said.

Renewable energy
The ERG CEO said that Bahia leads Brazil’s renewable energy shift, with the state being in first place in solar energy and second place in wind power generation. “The mine is in the middle of one of the region’s largest wind farms, enabling the possibility for the project to be entirely supplied by renewable energy,” he said.

In the long term, ERG sees demand for high-grade iron ore continuing to grow, resulting in the potential for a significant price premium once the asset enters full-scale production. In addition to its high Fe grade and low contaminants aiding steelmakers in reducing their CO2 emissions, BAMIN’s “green” credentials should be reinforced by the new FIOL railway replacing truck transport, and modern technology which will ensure “a very high level of water recycling,” the group foresees.

The iron ore market continues to be volatile due to supply disruptions and is also very much policy-driven in China, Sobotka said. “What we’re seeing today is a supply-disruption driven price spike and those disruptions aren’t going away: there’s going to be a lot more supply shocks,” he said. Supply shocks could come from more frequent extreme weather events, tighter restrictions on tailings dams, logistical problems and supply chain issues, he added.

“Stock levels are pretty low and we’re pretty optimistic on prospects for iron ore both this year, and in the medium term,” Sobotka said.
Source: Platts