Company secures significant pipeline licence

22nd July 2011

Brazilian iron-ore mining company Ferrous Resources has been awarded the preliminary licence (PL) for its 400 km slurry pipeline.

The pipeline will connect its Viga mine, in Congonhas, Minas Gerais, to its port terminal in Presidente Kennedy (PK), Espírito Santo state. The pipeline is expected to transport 25-million tons a year of iron-ore from 2014.

The PL is a significant milestone in the development of Ferrous’s fully integrated iron-ore project in Brazil. The PL marks the approval of the environmental impact study for the slurry pipeline by the Brazilian Institute of Environment and Natural Resources (Ibama). This follows a period of extensive engagement with local authorities and communities, including 70 public hearings, to identify and deal with all stake- holder concerns.

The company will now begin to apply for an installation licence (IL), which, when awarded, permits construction of the pipeline to start. Ferrous expects the IL to be awarded in the second half of this year.

The company announced that in less than a year it has succeeded in acquiring 90% of land through which the proposed pipeline will pass. It is making significant progress with its land negotiations, making more rapid progress than past projects of a similar nature in Brazil, and remains confident of securing the remaining 10% of land.

“I am pleased to announce we have been awarded the PL for our slurry pipeline. It is a significant achievement and demonstrates our commitment to the environment and wellbeing of local communities, which is why we won 2011’s Human Being Award for commitment to corporate social responsibility,” says Ferrous Resources CEO Mozart Kraemer Litwinski.

“Securing the licence also caps a period of intense activity. We have now become a fully operational company, producing high quality iron-ore from two of our flagship mines, Esperanca and Viga, and have made our first international shipment 162 700 t of sinter feed to China. We remain on track to meet our production target of 2.5-million tons by the end of this year, and to [realise] our potential of becoming one of the top five producers of iron-ore in the world,” he says.

Pipeline Update

The engineering design of the pipeline and the advanced geotechnical study, which entails 90% of the required drilling, are complete. The relationship with the surrounding communities has proven to be advantageous for the company in the delivery of the pipeline project.

During the survey of local communities by Ibama, as part of the process to secure the PL, company technicians were able to verify that Ferrous had already started work on its geotechnical study to refine the pipeline design.

The geotechnical study and the changes in design will reduce Ferrous’s social and environmental impact and increase its security, a point confirmed by Ibama technicians, which will reduce the overall cost by 20%.

“We have improved the engineering in parallel with efforts to secure the EL. Most other companies wait until after being awarded the PL before doing this. We have jumped two years ahead of schedule,” says Ferrous Resources senior VP and leader of the pipeline project André Simão.

Social Responsibility

Ferrous has adopted an innovative approach to the engagement with local communities living on the route of the pipeline. It hired people from within communities to promote communication and exchange of ideas with local residents and the company about the pipeline. The new employees were fully trained.

The company also partnered with the Federal University of Viçosa to undertake a socioeconomic study of the families whose properties reside on the pipeline route.

The study helped to identify more accurately the characteristics, needs and vulnerabilities of each affected family. The most vulnerable families have been provided with assistance from sociologists, psychologists, educators and agronomists hired by Ferrous.

The aim of this new approach is to reduce the disruption caused by the pipeline as much as possible and was in line with guidelines from the World Bank and the International Finance Corporation.

Ferrous holds significant iron-ore assets in Brazil, with current Australian standard for reporting ore reserves Joint Ore Reserves Committee resources of 5.1-billion tons and exploration potential of 1.8-billion tons. It has five distinct assets in the Iron Quadrangle region of Minas Gerais state, the largest iron-ore-producing region in Brazil, and one asset in Bahia state.

It is developing its own infrastructure system that is expected to encompass the port terminal and slurry pipelines connecting its mines. Stage one of the infrastructure project includes the construction of a PK pipeline, connecting the port terminal with the Viga mine.

Stage two of the infrastructure project includes construction of a beneficiation plant to process iron-ore from its Esperança and Serrinha mines, construction of pipelines connecting those mines with the Viga mine and expansion of the PK pipeline and the port terminal to 50-million tons a year.

Further, Ferrous plans to develop the Jacuipe property, in Bahia state, separately, by constructing integrated infrastructure, with a capacity of about 12-million tons a year of iron-ore, comprising a port in Bahia state and a slurry pipeline connecting the Jacuipe property to the port.