Brazilian miner BAMIN signs rail concession to boost iron ore mine capacity, export access

Brazilian miner BAMIN has signed a concession agreement with Brazil's federal government to complete and operate a section of FIOL (East-West Integration) railway, parent company Eurasian Resources Group said Sept. 8. The agreement will allow BAMIN to expand capacity at its Pedra de Ferro export-oriented iron ore mine to around 20 million mt/year.

Pedra de Ferro, which started commercial operations this year and is located in Caetité, Bahia state in the country's northeast, produces 65% Fe high quality hematite direct-shipping iron ore. FIOL will link the Pedra de Ferro mine with Porto Sul, which is currently under construction in Ilhéus, also in Bahia. Export market demand for high-grade iron ore is currently high, as high-grade iron ore's usage can help lower the quantities of coking coal used in blast furnaces, thus reducing emissions.

Pedra de Ferro is expected to produce 1 million mt iron ore by the end of 2021. Once the port and FIOL are completed, which is expected for 2026, the mine should produce 18 million mt/year, ERG said.

BAMIN won the right to complete and operate FIOL's first 537-km stretch in an auction on the São Paulo Stock Exchange in April. Completion of this stretch of FIOL will give BAMIN's iron ore mine access to the export market, as the project also involves a seaport. The railway and port will also be used to ship agricultural goods.

The concession agreement gives BAMIN 120 days to evaluate the progress of construction and other related works, scheduled to be resumed in second-half 2022.

BAMIN will continue construction of FIOL, which was until recently under construction by state-owned railway engineering and construction company Valec. The 35-year sub-concession includes five years for construction and 30 years for operation. BAMIN's investment in the railroad and rolling stock will be around BRL3.3 billion ($683 million).

When completed, FIOL will be able to carry 60 million mt/year freight, with BAMIN's products accounting for a third of this capacity. More than 40 million mt/year cargo capacity will be made available for other businesses in both the mining and agricultural sector, as well as other industries in the Bahia region.

ERG, a diversified natural resources group, is already the largest transport operator in Central Asia, where it has various mine operations. It transports over 50 million mt/year using 10,000 vehicles, and maintains 2,500 wagons and over 1,000 locomotives.

Eduardo Ledsham, CEO of BAMIN, described the Pedra de Ferro mine, Porto Sul, and FIOL projects as an "important milestone for the country's economic development.....a new logistics corridor to integrate the west with the east of Brazil, creating a new exportation pathway. The state of Bahia will occupy a new and important place in the national economy, becoming the third largest iron ore producer in the country."

With two more stretches to be built in the future, the FIOL railway will eventually be 1,527 km long, reaching the state of Tocantins to connect to Brazil's North-South Railway. The second stretch of the railway will link Caetité to Barreiras, while the third stretch will extend to the city of Figueirópolis in Tocantins state.

Porto Sul is being constructed in partnership with the Bahia government. BAMIN will export its products, while also using the port's capacity for other types of cargo, such as grains, fertilizers and other minerals. As a deepwater port, Porto Sul will be the first in Brazil's northeast to receive vessels with a capacity of up to 220,000 tons.