ERG and Bahia Mineração announce signing of MoU with State of Bahia and Chinese consortium to develop 20 mtpa integrated iron ore project

04.09.2017
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04 September 2017, Beijing, China – Eurasian Resources Group (“ERG” or “the Group”), a leading diversified natural resources producer, and its wholly-owned Brazilian subsidiary Bahia Mineração (“BAMIN”), today announced that BAMIN has signed a memorandum of understanding (“MoU”) with the State of Bahia and a consortium of Chinese companies to develop a $2.4bn integrated mining and logistics project in Brazil. The project includes BAMIN’s Pedra de Ferro iron ore mine, the Porto Sul deep-water port and the associated FIOL railway. The MoU signing took place during a bilateral meeting of Brazilian and Chinese businesses and government officials in the presence of the President of the People’s Republic of China, Xi Jinping, and the President of the Federative Republic of Brazil, Michel Temer.

The Chinese consortium is comprised of leading infrastructure and machinery companies and includes China Railway Group, China Communications Construction Company and Dalian Huarui Heavy Industry Group. The MoU sets out the intention of the consortium to participate jointly with BAMIN in the ownership and development of the integrated mine, rail and port project and to arrange its financing.

The MoU further sets out the State of Bahia’s intention to support the development of the project by enabling the use of Porto Sul for the handling of agricultural and other products, and by promoting tax benefits for Porto Sul and the FIOL railway.

Rui Costa dos Santos, Governor of State of Bahia, described the project behind the MoU as “an important step for Bahia to grow, generate employment and bring development to the entire State.”

Commenting on the MoU, Dr Alexander Machkevitch, Chairman of the Board of Directors of ERG, said, "This agreement is a major achievement for all parties. Once operational, the Pedra de Ferro mine will supply up to 20 million tonnes of high quality iron ore to global markets annually, cementing ERG’s position as one of the world’s leading producers of iron ore. I am delighted with the support that the project has received from the State of Bahia and proud of the benefits that it will bring to the local economy: the Group is committed to ensuring the sustainable growth of all of the communities that it partners with.”

“I am very pleased that we have reached this important milestone at BAMIN,” said Benedikt Sobotka, Chief Executive Officer of ERG. “With this MoU, we are partnering with some of the leading enterprises in China and continuing our partnership with the State of Bahia to advance one of the world’s most attractive iron ore developments into construction, and establish an important building block for the Bi-Oceanic railway.”

The Pedra de Ferro mine will develop high grade, large-scale iron ore reserves located near the city of Caetité in Bahia in northeast Brazil. Once operational, the mine will produce up to 20 million tonnes per annum of high-quality iron ore products including a significant quantity of direct shipping ore that does not require wet processing. The quality and scale of Pedra de Ferro’s reserves along with its access to efficient logistics infrastructure will make the plant one of the lowest cost producers of iron ore in the world.

Porto Sul will be a deep-water port located north of the city of Ilhéus, Bahia. It will be capable of handling up to capesize vessels and will be the export point for BAMIN’s iron ore, as well as an important import and export centre for agricultural and other products.

The FIOL railway is a new broad-gauge railway system which will become a major transportation corridor in Brazil’s northeast. The railway is being developed in stages, with the first 535 km of tracks extending inland from Porto Sul to a site near Caetité. Subsequent stages will extend further inland to reach Brazil’s agricultural heartland and connect with other railway systems. The FIOL railway is owned by the Federal Government of Brazil, who announced their intention to auction it as a concession to private parties.

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