UPDATE 1-Vale obtains license to expand giant Amazon iron ore mine

Wed Jul 3, 2013 7:05pm EDT

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RIO DE JANEIRO, July 3 (Reuters) - Vale SA, the world's largest iron ore miner, received a license from Brazil's Environmental Protection Agency to build a $19.5 billion expansion to its giant Carajas iron ore mining project, CEO Murilo Ferreira said on Wednesday.

The expansion, known as the Serra Sul Mine, the latest project at Carajas in Brazil's Amazonian state of ParĂ¡, is expected to start production in 2016 and reach full capacity of 90 million tonnes a year of iron ore in 2018, or nearly a third of Vale's existing annual output.

Rio de Janeiro-based Vale has been cutting investments outside of Brazil to focus on Serra Sul and other local mining projects as rising demand for minerals from China slows. The new mine is expected to replace depleted projects, primarily in Brazil's southeastern state of Minas Gerais and help make up for declining ore quality at some other mines, Ferreira said.

Demand for iron ore is expected to grow at about 3 percent a year in the next several years, Ferreira said.

The mine is also expected to be Vale's most efficient and ecologically sustainable. It will use far less water than previous mines and will not require the traditional mining waste dump to hold uncommercial leftovers from processing, Vale said.

It will also avoid the use of diesel-guzzling trucks using electric conveyors and other equipment to shift earth and ore.

Vale's shares trimmed losses after the announcement but still closed 0.9 percent lower at 25.86 reais.

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