Vale Investing in West III Project
Brazilian iron ore giant Vale announced that its Board of Directors approved the establishment, by its subsidiary Vale International SA, of a Joint Venture with Ningbo Zhoushan Port Company Limited, a subsidiary of Zhejiang Provincial Seaport Investment & Operation Group Co Ltd, to build, own and operate the West III Project in Shulanghu Port in Zhoushan City in Zhejiang Province in China. The West III Project consists in expanding the Shulanghu Port facilities, developing a stockyard and loading berths with additional 20 million tonnes per year capacity. By participating in the Project, Vale will secure a total port capacity of 40 million tonnes per year in Shulanghu, which will help Vale to optimize its overall supply chain costs.
The Project has total multiyear investments of RMB 4.3 billion (USD 624 million, full equity, 100% basis) and it includes acquisition of land rights and the development of port capacity of 20 million tonnes per year, including the construction of a new stockyard and two loading berths, subjects to regulatory approvals.
Vale will own 50% of the JV and both parties intend to obtain third-party loan of up to 65%, but not less than 50% of the total investment. With these assumptions, Vale's capital contribution to the project will vary between USD 109 million and USD 156 million, approximately. The construction of the project, which is expected to take up to three years, will start after both parties obtain the anti-trust and other regulatory approvals in China.
The Project secures strategic port capacity for Vale in China, as Shulanghu Port berths Valemaxes and allows Vale's shipping and distribution costs optimization.
In 2015, Vale launched the Brazilian Blend Fines, a product resulting from blending fines from Carajas, in the Northern System, with fines from the Southern and Southeastern Systems, which complement each other in terms of physical, chemical and metallurgical characteristics. The BRBF is produced at the Teluk Rubiah Maritime Terminal in Malaysia and at seventeen ports in China, including Shulanghu. This process reduces the time needed to reach Asian markets and increases our distribution capillarity by allowing the use of smaller vessels. The blending strategy also allows more efficient mining plans and increases the use of dry processing methods, which in return reduce capital expenditures, extend the life of our mines and reduce the use of water in our operations: a key flexibility to cope with the short-term challenges.