RPT-Vale gets environmental license for Amazon iron mine

* Mine holds about $1 trillion in iron reserves

* Project to expand output, replace depleted mines

* Vale needs to expand railways, ports for project

RIO DE JANEIRO, June 27 (Reuters) - Vale, the world's No. 2 mining company, said on Wednesday it received an environmental license to build its biggest-ever iron ore mine, an Amazon region project that holds about $1 trillion of reserves at current prices.

The S11D mine, an extension of the company's giant Carajas complex, is expected to cost $8.04 billion to build. It will produce 90 million metric tonnes of iron ore and begin operations in 2016, Vale said.

Vale, which puts out about 300 million tonnes a year, is the world's largest producer of iron ore. S11D's design capacity is equal to nearly 10 percent of the world's annual exports of the principal raw material for steel.

S11D will help Vale maintain production and exports, replacing output from ageing mines in Brazil's Amazon and Minas Gerais regions. It will also consolidate Carajas -- part of the company's Northern System of mines, railways and ports -- as Vale's most important iron-ore district.

The expansion will also help Vale keep up with Australian rivals BHP Billiton Ltd and Rio Tinto Ltd in meeting growing demand from China, the world's largest steelmaker and largest customer for iron ore.

Vale, BHP and Rio Tinto, known as iron ore's "Big Three", produce about 70 percent of the world's sea-borne iron ore exports of about 1 billion tonnes a year.

The preliminary license from Ibama, Brazil's environmental protection agency, is the first major hurdle in a series that Vale needs to clear to bring the mine into production.

The S11D project has faced delays as the company investigated potential risks to local plants and animals and studied potential archeological sites in and around the proposed mine site.

Vale said the new mine will use far less power and emit fewer greenhouse gasses than conventional open-pit mines.

Total investment to build the mine and expand rail and port systems will cost $11.4 billion, Vale said.

At current spot-market iron ore prices , the S11D reserves are worth nearly $1 trillion. Iron ore fell 1.24 percent to $135.40 a tonne in China's spot market on Wednesday.

Vale preferred shares, the company's most traded class of stock, eased 0.3 percent to 38.81 in Sao Paulo trading.