* Vale says still interested in Guinea
* Sees 1st tranche of oil and gas asset disposal in weeks
* Says no rush to sell Norsk Hydro, will wait for reasonable
* Says China's ban on Valemax ships costs it $2-$3 a tonne
By Clara Ferreira-Marques and Jeb Blount
LONDON/RIO DE JANEIRO, Dec 6 Brazil's Vale
, the world's top iron ore producer, has blamed a
Guinean government U-turn on rail and port links and shifting,
unclear regulation for its decision to shelve the giant Simandou
iron ore project.
Vale said it remained interested in working in Guinea and at
Simandou, site of the world's largest untapped deposit of iron
ore, but needed clarity to proceed with the project. It stopped
work on its part of the deposit in the spring and froze activity
at the smaller Zogota project months later.
Both projects, which Vale is developing with BSGR, the
mining arm of Israeli entrepreneur Beny Steinmetz's business
conglomerate, have been shelved, raising questions about the
their future as the government reviews mining contracts.
"We are still interested in being in Guinea. But we need
clarity. We have shareholders, and we need to be transparent
with them," Vale Chief Executive Murilo Ferreira said.
"The issue is in the hands of the Guinean government ...
They set the rules; they tell us what rules govern a project,
and they have not communicated the rules for this project yet."
Among the major question marks for Vale is the export route
for the millions of tonnes of high-grade iron ore that will be
mined in Guinea's forested south.
Guinea on Thursday denied there was any uncertainty over the
Simandou project saying a review of the contract over Simandou
northern blocs will be completed by the first quarter of 2013.
"On Simandou bloc 1 and 2, controlled by a Vale and BSGR
joint venture, questions relating to the validity of BSGR's
rights are currently under review by a technical committee,
which is expected to conclude the process before the end of the
first quarter of 2013," mines minister Mohamed Lamine Fofana
Unlike Rio Tinto, which is developing the southern
part of Simandou and will export through Guinea, Vale had hoped
to export through neighbouring Liberia - a shorter and less
expensive route but a less popular option with the government.
Ferreira said the government had informed Vale and BSGR that
the export route would be through Guinea, scrapping an earlier
concession which they obtained in exchange for agreeing to build
an almost 700 km rail line. That would drive up risks and
project costs already estimated at $10 billion.
Simandou's northern blocks, the area held by Vale and BSGR,
were originally part of Rio Tinto's Simandou concession but were
stripped from the mining major in 2008 after the government said
it was moving too slowly. Vale bought a stake in the northern
blocks in 2010 from BSGR in a $2.5 billion deal. Only $500
million has been paid, and Vale said targets had not been met
for more to be paid out.
The government has been considering Vale's and BSGR's
proposals on the project since last year, the Brazilian company
Rio, which is closer to production, has agreed to go through
Conakry but is also awaiting government decisions on a variety
of other issues.
Simandou is one of several projects on the line for Vale as
it aggressively retrenches in the face of competing demands for
its capital and weaker iron ore prices.
Earlier this week, the miner said it was pushing ahead with
plans to sell off non-core assets and would slash 2013 spending
by almost a quarter from the amount budgeted this year for new
It remains interested in assets outside Brazil, though the
quality of its flagship Carajas and Serra Sul iron ore assets
meant it will focus there to expand production volumes largely
stable since 2006, Ferreira said.
Among the non-core assets up for sale is Vale's oil and gas
division, which was bought as a hedge against rising energy
costs. Ferreira said the capital intensive business no longer
made sense as Vale has other drains on its cash resources.
"We will sell everything, but it takes time," Ferreira said.
"On the oil and gas process, we will make some announcements in
a few weeks. It is not for all the assets, because you don't
sell to just one company."
Vale also said it was still in talks with Chinese
authorities over a port ban on its giant Valemax ships and
expected an agreement in 2013.
The 400,000 deadweight tonne Valemax ships, designed for the
China trade, should save the company $6 per tonne in shipping
costs compared with capesize ships of 180,000 to 200,000 tonnes,
Vale's iron ore chief Jose Carlos Martins told investors and
But currently they are saving only $3 to $4 a tonne, because
the company must use smaller ships for the last leg of a voyage
into the ports.
"The situation is not optimal," Martins said. "Right now we
have to transfer ore to smaller ships at sea."