The Minas-Rio plant (above) could use Vale’s nearby rail line and Tubarão port to transport expanded output.
(Photo: Anglo American)

Under the transaction’s terms, Vale will contribute Serra da Serpentina and $157.5 million in cash to acquire a 15% shareholding in the enlarged Minas-Rio, subject to normal completion adjustments. If the average benchmark iron ore price remains above $100 per metric ton (mt) or below $80/mt for four years, a purchase price adjustment payment will be made to Anglo American or Vale, respectively, in line with an agreed formula.

“The opportunity to partner with Vale to secure a high-quality iron ore resource of this scale and quality, right next door to Minas-Rio, is compelling — particularly given all the physical synergies of our mining and processing infrastructure,” said Duncan Wanblad, CEO, Anglo American.

Serra da Serpentina has a mineral resource of 4.3 billion mt of iron ore, more than twice that of Minas-Rio. The resource also has a higher iron ore grade than Minas-Rio’s already high grade ore and contains predominantly softer friable ore that together are expected to translate into lower unit costs and capital requirements for its extraction. The combination of the two resources also offers considerable expansion opportunities, including the potential to double production, which Anglo American and Vale will assess.

“Minas-Rio is a Tier-1 asset that will benefit from great synergies with Serpentina’s deposit and Vale’s logistics and we are confident this partnership will unlock significant value to all of our stakeholders,” said Eduardo Bartolomeo, CEO of Vale. “We plan on allocating our share of the high-quality pellet feed to our pellet plants in Brazil and in the future to the Mega Hubs producing iron ore briquettes.”

Following completion of the transaction, Vale will receive its pro-rata share of Minas-Rio production. Vale will also have an option to acquire an additional 15% shareholding in the enlarged Minas- Rio for cash if and when certain events relating to a future expansion of Minas- Rio occur, including the receipt of the requisite environmental license for an expansion following the completion of a pre-feasibility study and feasibility study, at fair value calculated at the time of exercise of the option.

The enlarged Minas-Rio will have the option to use Vale’s nearby rail line and Tubarão port to transport expanded output as an alternative to constructing a second pipeline to Anglo American’s current port facility at Açu. All viable logistics solutions will be considered and evaluated during pre-feasibility. The existing Minas- Rio pipeline crosses the Vale rail network downstream from Minas-Rio, enabling a far shorter second pipeline to connect with the rail corridor to the Tubarão port.