Vale Moves on $12 Billion African Project Pipeline Through 2016

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--The global mining and resources major Vale S.A. (NYSE:VALE) (Rio de Janeiro, Brazil) is following a strategy of amassing metal and mineral resource projects in Africa. This follows the course heralded by the departing chief executive, Roger Agnelli, who said in October 2010 that Africa would replace Latin America as the primary supplier of raw materials to the booming Asian market.

African mining, mineral and hydrocarbon prospects are under scrutiny from industry heavyweights in China, India, North America, Australia, Russia and Brazil, that are vying to secure projects on the continent.

Vale South Africa Exploration Limited (Johannesburg), a subsidiary of Vale Inco Limited, has secured an industrial mining exploration license in Ethiopia's Southern Regional state. The mining area covers 1,882 square kilometers, and is 440 kilometers from the capital Addis Ababa. Vale is assessing the potential for copper, cobalt and nickel. The company is the world's second-largest nickel producer and is aiming to be among Africa's top three copper producers.

Vale is currently planning to invest more than $12 billion in Africa over the next five years, and this spending will peak in 2012 with $3.3 billion being invested during the year, said Ian Hart, Vale's exploration manger in Zambia at a recent mining and energy conference in Lusaka, the Zambian capital. Vale is scheduled to bring the Konkola North underground copper mine project into production in 2013 with its 50:50 joint venture partner African Rainbow Minerals (JSE:ARI) (Sandton, South Africa). The mine will have an estimated nominal production capacity of 45,000 tons of copper concentrate annually.

In western Mozambique, the company shipped its first train of coal from the Moatize project. The coal will be exported through the Indian Ocean port of Beira. The $1.65 billion project will initially produce 1 million tons of coal annually, but that will be ramped up to a total of 11 million tons in the future, comprising 8.5 million tons of metallurgical coking coal, and 2.5 million tons of thermal coal. Vale has said that it intends to become a large global player in the coal rich Tete district, which is forecast to provide 18% of global seaborne coal trade by 2025.

The company has been offering social projects in Guinea to protect its $2.5 billion stake in the Simandou iron-ore project, which contains one of the richest iron resources in the world.

One project that Vale has stepped back from in the Democratic Republic of Congo's Katanga province is a controlling investment in Metorex (JSE:MTX) (Johannesburg), which has a 75% stake in the Ruashi copper and cobalt mine. This has allowed Chinese bidders to step into the ring after Vale demurred from raising its bid. It also experienced opposition to the takeover from South Africa's National Union of Mineworkers.

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