Vale goes big and goes home

The 24th trading week of the year saw the world’s biggest iron ore miner — Vale — and Germany’s biggest steelmaker — ThyssenKrupp Steel — usher in a new era in steelmaking in Brazil.

• The joint-venture partners inaugurated the sinter plant at their new, state-of-the-art ThyssenKrupp CSA Siderurgica do Atlantico steelmaking complex, located on 9 sq. km in Santa Cruz in Rio de Janeiro’s West zone.

The US$6.2-billion venture is held 73.1% by ThyssenKrupp and 26.9% by Vale, and is the largest private investment in Brazil in 15 years. Vale boosted its stake to 26.9% from 10% last July, during the depths of the global recession, to ensure construction is completed on schedule.

Some 30,000 workers have been building the complex, which includes two blast furnaces, a coke plant, a seaport and a 490-megawatt-capacity thermal power plant. The partners call it the “most modern integrated steel mill complex in Latin America.”

When it reaches commercial production, the complex will directly employ 3,500 workers, who will produce 5 million tonnes of steel slabs per year. All the production will be exported, raising Brazil’s steel exports by 40% and adding US$1 billion per year to the country’s trade balance.

Vale will supply all the 8 million tonnes of iron ore to be used in the mill annually from its Brazilian mines, with the company having signed a 15-year supply contract — its longest ever.

Overall, Vale is involved in new steelmaking projects in Brazil that require US$21 billion in investments and will add 18.5 million tonnes per year to Brazil’s steel output, which stood at 42.1 million tonnes of crude steel in 2009. The new investments include the 100%- owned Acos Laminados do Para facility in Para state, which will be able to produce 2.5 million tonnes of steel annually when the US$3.2-billion project is up and running in 2013. Vale is building rail lines and a river terminal to service the facility. In Ceara, Vale has teamed with South Korea’s Dongkuk to build a US$4-billion integrated steel mill complex at the Pecem Industrial and Port Complex. It should be online in 2014.

Lastly, Vale is advancing its proposed, wholly owned Ubu Steel Co. project in Anchieta in Espirito Santo state. Vale will spend US$6.2 billion to build a plant that will produce 5 million tonnes of slab steel annually, and employ 6,000 workers directly. Production is expected to start in 2014.

Taken together, these are smart moves by Vale to get more value out of its iron ore projects, and ordinary Brazilians stand to benefit in a big way, too.

• It’s been such a revolving door that we’re starting to lose track, but yet another team of leaders is leaving Gabriel Resources and its flagship Rosia Montana advanced gold project in Romania, whose reality never quite seems to live up to its great promise on paper.

This time around, Michael Parrett, Alan Thomas, Raphael Girard, Ronald Simkus and Marcel DeGuire are heading for the exits, to be replaced by Raymond Flood, Walter Segsworth, Alfred Gusenbauer and David Peat. We’ll check in and see who’s still there in two years.

• The exploration highlight of the week was the reporting of a new resource estimate by Don Bubar’s Avalon Rare Metals at its Nechalacho rare earth element (REE) deposit in the Thor Lake area of the Northwest Territories.

Using a lower cutoff than before, inferred resources now stand at 176 million tonnes grading 1.43% total rare earth oxides (TREO). This essentially doubles the previous estimate and propels Nechalacho to the rank of the world’s second-largest REE deposit by reported TREO, and the third-largest contained-niobium deposit.

The new resource is the foundation for a positive prefeasibility study, newly released at presstime, which shows a nice after-tax net present value of $236 million at an 8% discount rate.

After so many years of effort in this obscure subsector, it’s great to see Bubar and his team take this unusual Canadian project to another level.

• On the other end of the spectrum is Appleton Exploration, which last year had to backtrack and admit that the Malian gold intercept it was touting as a 10-metre high-grade intercept was in fact 1 metre in length.

Well, Appleton and its president Tim Henneberry are at it again, this week trying to promote a 61-metre intercept grading 1.62 grams gold per tonne that includes a 1-metre interval grading 57.3 grams gold, uncut of course. At least this time around, shareholders have caught on: the shares dropped from 16¢ to 12¢ on the news instead of doubling, like they did last year.