Brazilian mining giant Vale SA has is to push ahead with capital expenditures of US$13.8 billion for new projects and sustaining existing operations and plans to spend an additional US$0.9 billion on research and development.
While these seem like big figures, they are, in fact, much reduced on previous years. Back in 2011, the company invested US$18 billion, but since then the figure has decreased with 2014 being the third consecutive year of decline.
The plan going forward is to maximise shareholder value, which means focusing on capital efficiency. With this in mind, Vale is concentrating efforts on expanding iron ore production and distribution as well as an integrated mine/plant/railway/port coal operations in Mozambique.
Murilo Ferreira, CEO of Vale SA, said the company was committed to deploying capital only in world-class assets with large reserves, low costs, high quality products and opportunities for low-cost, brownfield expansions. He added that all the company’s major projects had the required environmental permits and licences.
Key projects for Vale are the expansion of its Carajas iron ore operations, which will cost an estimated US$3.283 billion and improving its iron ore facilities at Itabiritos, which will cost an estimated US$1.067 billion. Developing an global iron ore distribution network will cost around US$870 million.
In 2014, Vale claims it will produce 312kt of iron ore; 43kt of pellets and 10.7kt of coal and that it will achieve 50% growth over five years from 2013 to 2018; its seaborne share rising from 23% (2013) to 28% (2018).
The Carajas plant is located in the Southern range of the Carajas, Para, Brazil and will have an estimated nominal capacity of 90Mt/yr of iron ore. Vale is currently half way there and hopes for a 2016 start-up date with a ramp up period of two years. The plant will employ 10,000 people. So far, the company has spent US$2.5 billion on the facility.
Expansion of railway and port facilities at the Carajas facility are moving along nicely with progress so far of 8% and 19% on the railway and maritime terminal respectively. At its peak the two terminals will employ 25,000 people and cost in the region of US$11.582 billion – so far Vale has spent US$953 million.
The US$4.5 billion earmarked as ‘sustaining capital’ will be spent on operations, building and expanding waste dumps and tailings dams, health and safety, CSR and administration.
Where research and development is concerned, the company plans to allocate US$384 million on mineral exploration; US$356 million on conceptual, pre-feasibility and feasibility studies; and US$163 million on new processes, technological innovation and adaptation.