Vale Plans to Raise Capacity With New Brazil Mine

Cia. Vale do Rio Doce, the world’s largest iron-ore producer, plans to raise output 12 percent with the opening today of a $1.1 billion mine in Brazil, helping to meet soaring Asian demand for the main steel ingredient.

The Brucutu mine in Sao Goncalo do Rio Abaixo, 92 kilometers (57 miles) from Belo Horizonte, in Brazil’s central highlands, will produce 30 million metric tons by 2008, Rio de Janeiro-based Vale said in an e-mailed statement yesterday.

“This is the biggest startup mine venture we’ve ever attempted,” Joao Rabello, manager of the mine, told reporters today at a ceremony to mark the opening. “Right now we have enough proven reserves to operate the mine for 30 years.”

Vale, which expects world iron ore demand to rise 5 percent in 2006, has budgeted $2.1 billion this year to expand iron-ore output, or almost half of the $4.6 billion it has budgeted for capital spending in 2006.

The company’s shares rose 61 centavos, or 1.5 percent, to 41.51 reais in Sao Paulo at 9:38 a.m. New York time. Prices of the material used to make steel rose 19 percent to a record this year as China, the world’s largest steelmaker, increased purchases.

China’s steel consumption may climb to 452 million tons in 2007, up from 407 million tons in 2006, according to Australia’s government forecaster. Two of the nine analysts surveyed by Bloomberg news in July expect iron ore prices to increase, with the remaining predicting it to be unchanged.

Of Brucutu’s $1.1 billion construction budget, Vale said $856 million is being spent on the mine itself and $206 million on locomotives and railroad wagons.

In 2005, Vale produced 255 million tons of iron ore and blast- furnace pellets, a concentrated form of ore. The Brucutu mine has reserves of about 740 million metric tons of iron ore.