Boats waiting to load iron ore at Port Hedland, Australia.
Source: The Ocean Foundation
Ports in a Storm
How does Brazil’s plan for the Porto Sul iron ore export port compare with similar projects around the world?
The following case studies draw on recent findings from Australia, India, DR Congo, Mozambique, Guinea, Liberia, Uruguay and Brazil itself.
They spotlight the considerable social, environmental, political – and economic – challenges of providing ports, railways, and other infrastructure to serve mining companies.
Can Brazil learn anything from other countries’ experiences?
For the first chapter please see: Pedra de Ferro – The Iron Stone (part 1)
For the second chapter please see: Pedra de Ferro – The Iron Stone (part 2)
For the third chapter please see: Pedra de Ferro – The Iron Stone (part 3)
A Dirty Dozen
1) Australia: Dredging and dumping near the Great Barrier Reef
Currently a major expansion of the world’s largest port for the export of coal and iron is moving ahead in Australia, at an unprecedented pace. The project – linked to the construction of Australia’s biggest-ever mine (which would cost Aus$16.5 billion) and other smaller mines – not only threatens the world’s largest coral reef, but is indirectly linked to the threat of increased global greenhouse gas emissions.
The relevance of this vast enterprise to the threats posed by Porto Sul to coastal and outlying coral reefs should not be under-estimated.
The Carmichael mine’s annual output will stand at around 60 million tonnes per years (tpy). (In comparison, the design capacity of South America’s premier coal mine, El Cerrejon in Colombia, is 32 million tonnes a year). [Australia’s biggest-ever mine is close to fruition.]
Funding for this mine is largely dependent on India’s huge Adani power company, which has already invested in a port terminal to the tune of US$2 billion. However, Adani is yet to make a final commitment to such funding, although Carmichael has now passed all domestic hurdles to receiving environmental clearance.
According to Reuters: “Adani’s plans to develop the existing export terminal at Abbot Point have been hampered by delays in finding a suitable site to dump up to three million cubic metres of sand and mud that needs to be dredged from the sea bed to add new terminals and loading berths.
“Environmentalists such as Greenpeace and others have argued that about 3 million cubic metres of dredged mud will be dumped in the Great Barrier Reef Marine Park during the expansion of the terminal, which would cause irreversible damage to the Reef’s fragile ecosystem.” [Reuters 11 August 2014]
In January 2014, Deutsche Bank, HSBC, Royal Bank of Scotland and Barclays refused to fund Adani Enterprises’ plans to expand Abbot Point after UNESCO warned of risks to the fragile ecosystem of the reef, dealing yet another blow to the project [Australia: What’s the point in Abbot Point?].
Located 400 km inland from the Great Barrier Reef would be the loading point for a major rail line which received an environmental permit from the Queensland state government in August this year [The Australian 11 August 2014].
Reuters notes that: “Adani requires billions of dollars to establish rail access, water and power supplies in the remote region before the Carmichael mine can be built. Considering the current coal price, which has plummeted to a record low of $70, Carmichael may require a coal price of at least $100 to make the mine viable.” [Reuters 11 August 2014]
Indeed, in November 2013, the US-based Institute for Energy Economics and Financial Analysis released a report warning investors that both the mine and infrastructure project were not commercially viable.
The points made by the Institute have direct relevance to Bamin’s Pedra de Ferro project and Porto Sul, albeit relating primarily to coal. They are highlighted below:
◾It’s a high-cost coal product in a low-cost market in structural decline. The project is uneconomic by any measure and is on the wrong side of the coal boom. It might have been viable five years ago but the market has moved on. Adani bought in at the peak of the coal cycle but failed to predict the structural decline of coal.
◾The estimated cost of production of Aus$87/tonne (energy adjusted) is likely to be above the global thermal coal price for the foreseeable future, rendering the project uneconomic.
◾Adani is in a weak financial position to execute such an ambitious project: with external equity market capitalisation at only $5.17 billion against an estimated net debt of $12 billion, development costs for the Carmichael and Abbot Point coal terminal projects are estimated at $10 billion.
◾Adani has over-estimated coal quality while under-estimating costs and project complexities. At peak production of 60 million tonnes per annum, Adani’s Carmichael mine would be by far the largest coal mine in Australia in a remote inland region with no power, rail, water or workforce infrastructure. Prior to 2013, Adani’s only other experience in coal mining is a 2-4 mtpa coal mine in Indonesia that has consistently performed below expectations. The project is plagued by delays that continue to squeeze the Adani Group’s cash flow, with the company conceding the 2014 timetable for commencement of production has been pushed out to 2016, but more likely 2017 with full production beyond 2022.
Adani was earlier considering exporting coal from new export terminals at Dudgeon Point, but in June 2014 Adani and North Queensland Bulk Ports Corporation abandoned plans to develop the Dudgeon terminals due to weakening demand for coal.
[See: Australia: Great Barrier Reef condition is ‘poor’]
2) Democratic Republic of Congo – writing off a project?
South Africa’s Exxaro mining company announced in June 2014 that it might have to “write down” as much as US$507.6 million spent on its Mayoko iron ore project in the Democratic Republic of Congo. Attempts failed to reach agreement with the government on the development of port and rail facilities.
This is considerably more than what it cost Exxaro to buy the mine in the first place – US$263.2 million. The company’s CEO said that the Mayoko project had become “economically unviable ” because of weakening of global iron ore prices, and also because Exxaro could not secure more favourable loan terms for the necessary rail and port developments.
Exxaro intended to move 12 million tpy of iron ore from the mine and required at least that much capacity on railway lines, according to the company. Even though the company was “not set” on having exclusive use of the railway, nonetheless it said the government “must be able to offer capacity beyond 12 million tonnes per year”.
Until the end of 2014, the company said it would concentrate on trying to secure favourable terms for the rail and port agreements.
Meanwhile, all other corporate expenditure has ceased, and in June, Exxaro started trying to sell off railway locomotives and carriages which had lain idle [BD Live, 15 June 2014].
3) Guinea – will it outstrip Brazil?
In May 2014, the West African state of Guinea signed an investment framework agreement with its partners, Rio Tinto (second only to Vale as an iron ore producer), the World’s Bank International Finance Corporation (IFC) , and China’s Chinalco, for an iron ore mine which will cost $20 billion to construct – if not more.
The project includes building almost 700 kilometres of rail, 35 bridges and a four-berth wharf, to be situated 11 km offshore.
This Simandou South deposit is only half of a vast iron field which extends further north and a mining licence for which has not yet been granted by the government. If the two halves of the deposit were combined – something which appears to make both economic and logistical sense – it would become one of the largest single iron mines on planet earth. And one which could dwarf Carajas, if and when it reaches full production [Reuters,21 May 2014].
Australia’s Business Spectator said in June this year that it “make[s] sense for the Guinean government, given that Guinea’s GDP is only about $US12 billion – a bit over $US1000 per capita – to look at the options for developing the northern half of the project in conjunction with the existing project, given the implications it might have for the infrastructure components of the Simandou South project (which envisages third party usage) and their appeal to prospective infrastructure investors.” [Business Spectator 30 June 2014]
The Simandou South blocks, controlled by Rio Tinto, are expected to eventually produce 100 million tonnes a year of ore, grading a very high 60% and 68% Fe., while the northern blocks could produce an equivalent amount of similar quality ore. [Business Spectator ibid]
However, the combined project is not by any means up and running. Initially scheduled for 2015, and even with the recent deal in place, initial exports would only commence by the end of 2018. Although Rio Tinto has already spent more than $3 billion on building open pits at Simandou South, the scale and scope of the development has now been placed in doubt by the fall in iron ore prices and a current market over-supply [mining.com 19 May 2014].
Rio Tinto was forced by the Guinean government to abandon its much cheaper original plan to transport production by rail to the deep Buchanan port in neighbouring Liberia (see also Liberia, below).
The revised plan involves a much longer and costlier railway crossing the country, to the northern port of Conakry, Guinea’s capital. The government hopes that this will bring more economic benefit to the country, in terms of taxes, tariffs and employment.
A scandalous history
In 2009, the world’s most powerful “diamantaire”, Israeli Beny Steinmetz , agreed to sell 51 per cent of his interest in Simandou North to Vale for $US2.5 billion. But Vale had only handed over $US500 million of this when a new Guinean government, elected in 2010, began to review how mining licences had been awarded by the former corrupt regime.
Four years later, that review led to the decision to strip Vale and BSGR of the rights to the northern parts of Simandou.
It wasn’t only the government that was incensed at the two companies’ shenanigans. Rio Tinto also recently took out cases in the US courts against Vale and BSGR, claiming that the Steinmetz group had bribed Guinean officials to get its hands on the licences previously held by Rio Tinto.
Vale was accused of feigning interest in a Simandou joint venture with the British company, primarily to access confidential geological and technical information that it then shared with BSGR, thus “misappropriating” Rio Tinto’s rights.
The prospect of huge riches deriving from a consolidated Simandou mining operation have naturally attracted the interest of a large number of mining and other companies, including, unsurprisingly, Glencore.
The recent investment framework agreement envisages that the infrastructure – in rail and port – will be owned by new investors, not mining companies.
While Glencore has publicly stated it isn’t interested in greenfield investments, as Business Spectator says: “[T]he lure of a tier-one resource is near irresistible for the big miners, even in an environment where the Simandou ore might begin coming into the market at a point where there is a substantial surplus of supply [of iron ore] over demand.” [Business Spectator 30 June 2014]
According to Sam Walsh, CEO of Rio Tinto: ” The infrastructure that brings Guinea’s natural resource wealth to global markets can do so much more for the country…Once Simandou[ South] is fully operational, it will contribute an estimated $US7.6 bn to the Guinean economy each year, dwarfing the amount of aid payments the country receives.”
Ironically, Mr Walsh made that statement just as his company was digging up and exporting more iron ore than ever before – thus helping spur on a lowering of its price on already-depressed international markets.
If that price doesn’t improve in the near future, as seems very likely, the $US7.6 billion Guinean bonanza, predicted by Walsh, will prove chimerical.
4) Liberia – weighing up the alternatives
At the same time that the investment agreement was signed between the Guinean government and Rio Tinto, its fellow Anglo-Australian miner, BHP Billiton – the world’s third biggest iron ore producer – and its partner Areva of France, decided to pull out of Guinea’s Mount Nimba iron ore project [mining.com 19 May 2014].
According to mining.com, the Mount Nimba deposit contains some 935 million tonnes of assured reserves that can be directly shipped without processing, at an average grade of 63.5% ferrous content.
The new owner of Mount Nimba is Luxembourg-based ArcelorMittal, the world’s premier steel manufacturer, which now has a 56.5% stake in Euronimba Ltd, a company that holds a 95% stake in the Mount Nimba deposit.
However, the deal is contingent upon the Guinean government granting permission for ArcelorMittal to ship the ore (presumably by rail) across the border into Liberia.
The deposit lies just 40 kilometres from ArcelorMittal’s existing Liberian iron-ore mine, which means so the steel maker would use its existing rail and port infrastructure in Liberia, in particular the Buchanan port, to lower the costs of developing the project.
[Dow Jones Newswires, 1 August 2014. See also: http://www.nasdaq.com/article/arcelormittal-agrees-to-buy-stake-in-guineas-mount-nimba-ironore-project-20140801-00077#ixzz3AfKjZCR.]
5) Mozambique – serving other countries first
The east African former Portuguese colony of Mozambique hosts one of the world’s largest deposits of high-quality metallurgical coal, as well as the thermal variety.
It’s therefore little surprise that many mining companies – including those not immediately identified as top rank producers of the black stuff – are engaged in a “coal rush” on the country.
Metallurgical coal is just what it says “on the tin” since it’s vital to the smelting of of iron into steel. Hence the concern of Vale, and more recently ENRC, to capture such supplies and offer them profitably to existing steel customers.
ENRC has major mining interests in the east African former Portuguese colony of Mozambique. They are focussed on its Estima coal project in the province of Tete, the heart of the country’s abundant metallurgical coal resources.
A US$4.4 billion new rail line was initially planned to transport thermal coal produced at this mine, over a distance of no fewer than 1,000 kilometres, ending up at a “dedicated export terminal”.
The parallels with Brazil, and the controversy over infrastructure options available for ENRC’s Pedra de Ferro project, are striking.
The Mozambique line was designed by UK-based global engineering, development and construction firm, Mott Macdonald. (Among its many undertakings has been the conducting of an environmental impact assessment for Vale’s Salobo copper mine in Brazil) .
The line would have a capacity of 40-60 million tonnes per year, with an expansion to 100 million tpy on construction of additional rail spurs.
Third-party users would be able to gain access to “excess capacity” on the line, and as part of the infrastructure, ENRC plans to develop a dedicated export terminal at the port of Nacala, currently being expanded and developed by the Japanese state investment fund, Jogmec.
A separate operating company has been formed to operate the ENRC line which would be owned by miners using it – not only ENRC – and with state-owned rail operator CFM holding an equity stake.
However, although ENRC originally planned to start construction of the line in late 2014, with initial shipments scheduled for 2016, the Kazakh company has now halted work, citing “structural reasons” for doing so. This statement may be reasonably interpreted as a reference to the company’s inability to cope with internal strife, allegations of corruption, and debt burden [see Chapter One].
As Steel First commented: ” ENRC has been plagued by controversy for the past year. [It] suspended its coal manager in Mozambique in April 2013 after whistle-blowing allegations of impropriety.
“ENRC de-listed from the London Stock Exchange in November, six months after the UK’s Serious Fraud Office announced an investigation into “allegations of fraud, bribery and corruption relating to the activities of the company or its subsidiaries in Kazakhstan and Africa” [Steel First, 5 February 2014].
Vale’s problems – at rail and port
Brazil’s Vale has been extracting coal from its Moatize mine in Tete province since July 2011. The ore is carried 575 kilometres along the Sena railway to the port of Beira, along with consignments from other companies operating in Tete, including Rio Tinto and India’s Jindal Steel.
Both the line and the port are operated by state-owned Mozambican Railway Company (CFM), which is currently investing some €164-million in increasing the capacity of the Sena line, more than threefold, from 6.5-million tons/year to 20-Mt/y [Mining Weekly, 6 June 2014].
Vale is also currently building an alternative rail route from Moatize to the sea, which will run via Malawi to the Mozambique port of Nacala and run south of ENRC’s own projected line to the port [Steel First 5 February 2014].
In April this year, the Sena railway was attacked by persons who the government claimed were part of Renamo, the rebel group which has long been fighting against Frelimo, the party in power; Renamo itself blamed the government for trying to discredit it [Agence France Presse, 2 April 2014].
Only a month later, on 27 May 2014, a Vale train travelling along the same line with 2,000 tonnes of coal became derailed. As Mining Weekly graphically described the accident: “No fewer than 32 of the wagons completely toppled over, spilling their cargo and forcing a halt to all traffic on the line. Usually, more than 24 trains run on the line every day..
“The derailment came only a few days after new Vale country manager for Mozambique and CEO of Vale Mozambique Pedro Gutemberg warned that logistical problems were damaging the competitiveness of the country’s coal industry.”
Mr Gutemberg said that: “[R]ail and shipping costs, plus a drop in coal prices, [are] the causes of Moatize operation’s $44-million loss during the first quarter of this year… it [is] five times cheaper to transport coal from Australia to China than from Mozambique to China. This [is] not just due to the African country being much further away, but also because Mozambique’s coal mines were well inland.” [Mining Weekly 6 June 2014]
Another company looking for a port
In June 2011, India’s Essar Group agreed to build a 20 million-tonne a year iron ore export terminal at the Mozambican port of Beira, banking on demand from China to make the project viable.
For the next three years, the company struggled to float the project and, by summer 2014, had been forced to virtually halve its size.
The terminal was originally designed to ship surplus output from the company’s own Mwanezi and Ripple Creek mines in neighbouring Zimbabwe, as the company boosted its reserves of iron ore and coal after prices jumped on increased demand from Asia.
“The mines will first serve the steel making operations, after which we’ll look at export potential,” said Essar in June 2011. [Bloomberg 8 June 2011]
Almost three years later, however, Essar had considerably modified its plans. According to the Press Trust of India, it was now seeking the approval of its shareholders to invest up to $25 million in a joint venture with the port and rail authority of Mozambique (30%), called NCTB [PTI 1 April 2014].
NCTB was formed to develop the Beira port terminal with a capacity of only 10 million tonnes a year – although this could be increased by 10 million tonnes “in case of availability of cargo”. Essar would also have to provide a corporate guarantee of up to US $10 million
NCTB has already secured a letter of intent from the Ministry of Transport and Communications of Mozambique, granting a long-term concession for the development of this terminal on a DBOOT (design, build, own, operate and transfer) basis [PTI ibid] .
…and yet another
In 2013, another company, at another port, Mozambique-based Terminal de Carvao da Matola (TCM,) added 25% to its capacity to export magnetite, iron-ore and coal, amounting to 7.5-millions tons yearly. The thermal coal is supplied from South African collieries in Mpumalanga province, while the magnetite and iron oxide comes from mines in Phalaborwa, also in South Africa.
In fact, during the past year, magnetite exports have exceeded coal as the prime commodity exported from the terminal. The target is to export 12-million tonnes all-told by 2016., with upgrading and modernising of the existing terminal, the replacement and upgrading of bulk materials handling equipment and conveyor systems, as well as deepening the existing berth at the TCM by means of dredging and constructing a new berth.
The dredging of the existing berth will allow for docking of fully-laden Panamax-sized vessels – each averaging 70,000 tonnes – and the construction of a new quays due for completion in 2015.
Dave Rennie, CEO of Grindrod Ports and Terminals, says that: “Commodity markets will determine the commodity mix in the terminal. Grindrod also operates Grindrod Mozambique Limitada, located in the main port of Maputo, which has a throughput capacity of four-million tons a year. This facility exports coal, destined for the Turkish domestic market, and iron oxide and magnetite destined for the Far East.
“We continue to work very closely with South African State rail company Transnet Freight Rail* and the exporters to ensure that demand and supply are aligned and to create export capacity for the established and junior coal mining community of Southern Africa,” he concluded. [Mining Weekly 14 March 2014]
* Transnet is a South African state-owned company whose plans to expand Durban’s port to accommodate increased coal and oil exports has come under heavy fire from environmental and climate-change campaigners [See: Transnet, South Africa: Coughing canary in the climate coal mine.]
6) Malawi – an uneasy compromise between business interests and poorer citizens
Malawi is a landlocked country that currently relies on the Mozambique ports of Beira and Nacala for the transportation of imported and exported goods. This necessitates their travelling a distance of about 1700km to and from Blantyre, the capital of Malawi.
Soon, using Malawi’s Nsanje port, transporters will cover a distance of 238 km for a return journey to Blantyre. Thus, there should be considerable reduction in the costs of conveying not only minerals, but other vital products such as agricultural commodities.
The port is located on the Shire river, which passes along the boundary between Malawi and Mozambique, then flows into the Zambezi river and thence into the Indian Ocean through Chinned Port.
It is claimed that the project will also provide Malawi with a multi-modal transport linkage to the other land-locked countries of Zimbabwe and Zambia and that the people of Nsanje district will be “empowered socially and economically due to new infrastructure and markets, established to support the services of the port; the creation of temporary and permanent jobs; and time saving and reduction on wear and tear of vehicles due to reduced travel distance”.
Nonetheless, there will also be negative impacts, especially on poorer citizens – a loss of fishing areas and income for fishermen, who used to fish along the shire river; and air and water pollution because of construction work on the site.
The project will affect the water species found along this area of the Shire river. One commentator has said “[E[mpowerment of people socially and economically may increase the spreading of HIV and AIDS – this district already having a high percentage of HIV patients…visual scenery will be affected by newly built structures, and there will be risk to flooding along the Shire river as well as conflicts with local host communities.
7) India – a struggle that ‘s already lasted nine years
The largest foreign direct investment ever made in India has largely been suspended for the past nine years and its legality, as well as original design features, have been subjected to scrutiny and condemnation – up to the highest levels of government..[http://www.minesandcommunities.org/article.php?a=12536].
The project, owned by South Korean POSCO iron and steel company, will require more than 12,000 acres of land, including approximately 4,000 acres for iron ore mines, a steel plant and a captive port, in an area that is home to forest-dwelling communities and a vibrant and sustainable local economy centred around betel leaf cultivation.
Through sustained and peaceful opposition, affected communities – including betel leaf farmers, fisher folk, and Dalits (so-called “untouchables”) – have effectively stalled the project and resisted forcible evictions from lands they have cultivated for generations.
In October 2013, eight independent UN human rights experts called for an immediate halt to this project, citing serious human rights concerns.
Their report – The Price of Steel – was produced by the International Human Rights Clinic (IHRC) at NYU School of Law and the International Network for Economic, Social and Cultural Rights (ESCR-Net) and based on a year-long investigation.
It calls for a suspension of the POSCO project, and a halt to human rights abuses “before they become even more catastrophic in scale”. [UN OHCHR press release – http://www.ohchr.org/EN/NewsEvents/Pages/DisplayNews.aspx?NewsID=13805&LangID=E]
In January this year, nearly 50,000 fisher folk appealed to the Indian government’s National Green Tribunal (NGT) to prevent POSCO from building its iron/steel port at that location. These fisherfolk are dependent on the Barunei, Mahanadi and Jatadhari river mouths for fishing and have constituted a local association, called Kalinga Karndhar Kaibartya Solabhai Sabha (KKKSS).
In a statement – which strikingly echoes the concerns of fisherfolk close to the planned Porto Sul port – they said they were already suffering from dwindling fish stocks, and now threatened by worse to come:
“Thousands of fisherfolk are living in a critical condition due to low fish catch at Barunei and Mahanadi river mouths. The situation will worsen if the NGT allows POSCO to build its captive port at Jatadhari river mouth. The fisher communities would be deprived of their livelihood and will be forced to migrate to other states to work as bonded labourers.”
Environmental activists have also raised concerns on the possible impact of the port on marine life, especially Olive Ridley turtles. [Business Standard 14 January 2014].
8) Uruguay – parallels with Porto Sul
In January 2014, Uruguayan President Jose Mujica gave the go-ahead for a massive iron ore mine called Valentines, to be owned and operated by Zamin Ferrous through its subsidiary Minera Aratari. However, there was little love shown for his decision, on the part of many Uruguayan citizens.
Once London-listed Zamin Ferrous had completed the sale of its in BAMIN to ENRC in September 2010, it concentrated focussed on “developing” the Valentines project in Uruguay.
However, this $3 billion mine was put on hold in August 2013, as the government was in the midst of passing a new mining law to allow large-scale operations. Opponents of the mine claim that this was done specifically to satisfy Zamin’s ambitions.
Valentines is a major three-phase development scheme which includes the construction of underground slurry and return water pipelines to connect the mine to a deep water port which will be built on Uruguay’s Atlantic coast.
The project faced disapproval when first proposed in 2008, at the time that Zamin’s subsidiary Minera Aratirí was granted initial exploration permits.
That opposition intensified after Zamin and Mujica agreed to work together on building the deep-water port, which the Uruguayan President argues will “boost the country’s economy”.
According to mining.com, earlier this year: “Currently, Uruguay depends on the goodwill of Argentina and Brazil for much of its global exports. But earlier this month, Brazil said it would support Uruguay’s plans to have its own terminal and so bypass Argentina.” [mining.com 23 January 2014]
Two and a half years earlier, the Observatorio Minero del Uruguay argued that the mining-to-port project would threaten a significant proportion of the country’s ecology: “Such a project would affect the ecosystem and pastoral farming in the Cuchilla Grande, palm groves and wetlands, the Laguna Negra, the environment, tourism and the coastal populations of Rocha.
“In presentations carried out by the company, and also in information supplied by the ministries involved (Industry, Energy and Mining and Housing, Land Planning and Environment), it remains to be explained what the source of the energy supply would be (25 megawatts, 15% of the country’s total consumption) or that of the water required … including the 230 km long, 62cm diameter pipeline for transferring the iron to the port.
“If this is authorised, Aratirí plans to extract 10 million tonnes of iron annually and export them to China. [The] … ore slurry pipeline would [cross] the departments of Lavalleja and Rocha to La Angostura beach along the 288 km of Route 9, between the La Esmeralda and Punta del Diablo beach resorts, where a deep-water port for a variety of uses would be located.
“On 13 February  agriculturist Arturo Abella, a member of the Neighbours’ Network of La Esmeralda, revealed two graphs with a design of the planned port and its main components on Channel 8 in Rocha. It would be a huge structure with two separate parallel piers, 2.5 km apart, and 4 km out to sea, and an operating area reaching to Laguna Negra.
“The distance between the port and the beach resorts mentioned would be less than if a pier were built from the coast to the offshore point.”
[Observatorio Minera del Uruguay, see: Mining project threatens Uruguay ecosystems]
9) Brazil – Iron in the firing line
The Açu port, north of Rio de Janeiro, is the preferred destination of iron ore coming, via a 525 kilometre pipeline, from the huge Minas-Rio mine in Minas Gerais state, a project being developed by London-listed Anglo American plc from 2007.
A commentator for South Africa’s Financial Mail in October 2013 commented that this was “…a complex project at the outset but some of the problems it has faced may have been unforeseeable.
“They included delays in getting permits and land access, the discovery of caves at the site of the beneficiation plant which has delayed construction, and high inflation in Brazil.” (Note that BAMIN’s Caetite mine site is also the location of similar caves.)
By the middle of 2012, Anglo American reported that more than 55% of the pipeline had been laid and over 99% of land access had been secured.” [Financial Mail 11 October 2013].
However, the labour force was still “presenting problems”. According to Anglo American: “High turnover, absenteeism and issues concerning workforce availability in general are affecting construction activities.” [Financial Mail ibid]
The company claimed that these problems were “being addressed by using more contractors, refocusing resources to critical areas, and extending contractors’ working hours.” [Financial Mail, ibid]
In April 2014, members of the London Mining Network (LMN) lobbied Anglo American at its shareholders’ Annual General Meeting, on behalf of several Brazilian organisations which had asked LMN to do so.
One of these “dissident” shareholders asserted that local people had “reported intimidation by armed security guards supposedly linked to the company” and asked: “Would the company make sure it was not linked in any way to abuses by armed security?”
The company trotted out a well-worn and pro-forma reply: “We work to the highest possible social and environmental standards…creating jobs and educating local young people… The very fact that we are obtaining the necessary permits shows that we are working to the highest standards.” [London Mining Network 25 April 2014]
Another shareholder, also presenting accusations made by Brazilian NGOs, stated that “damage [had been] done by construction of [the] pipeline…to take ore from the mine to the new export port. Land acquisition agreements have not been completed.
“Would the company respect modified guidelines? Local people have complained of disruption to their water supplies. How does the company act on people’s complaints?”
Anglo American’s answer was that water supplies were disrupted for only a few days, and that it had now acquired all the land required for the pipeline. [London Mining Network, ibid]
10) End note: the mishap in Amapa
Theses weren’t the only challenges which Anglo American has had to face recently in Brazil in its attempt to kick-start the Minas Rio venture.
In September 2013, IMAP, Brazil’s environmental watchdog in Amapa, levied a US$10 million fine on the company for an incident which had killed three people and left another three missing at the company’s port terminal.
According to O Globo, IMAP imposed the penalty because of the “environmental alterations” caused by the collapse of a pier. The company attributed the fatal accident to an “abnormally large wave of water rushing down the river”, thus causing a landslide
The company acquired 70% control of Amapa from Eike Batista’s MMX in 2008 as part of its $5.5 billion purchase of Minas Rio.
However, Anglo American deemed Amapa to be “non-core” to its interests and put it up for sale in 2012. The buyer was, not surprisingly, Zamin Ferrous. [mining.com 4 April 2013]
Brazil’s richest man has seen his fortunes plummet in recent years, and by mid-2013, Eike Batista was forced further break up “his crumbling EBX Group industrial empire” to pay off debt.
But he held on to the port development company, LLX Logística SA, based at Açu port, which was initially intended to serve Brazil’s oil industry [Reuters 12 July 2013].
The project was “…dogged by scientists’ claims that its construction is polluting the surrounding lowlands ecosystem with salt… [and] some investors may not want exposure to a company facing possible ecological liabilities and potentially costly lawsuits.” [Reuters ibid]
A federal prosecutor launched a case against the port to determine civil liability for alleged environmental damage, stating that a “temporary” leak of salt-water into surrounding marshes in late 2012 caused lasting ecological harm to the delta of the Paraíba do Sul River, one of the last large, undeveloped coastal lowlands on Brazil’s south east coast.
Scientists at Northern Rio de Janeiro-State University (UENF) in Campos de Goytacazes found growing evidence that the port’s construction threatened a sensitive ecosystem.
While the UENF researchers said they didn’t have conclusive proof of long-term damage, nonetheless Açu’s surrounding marshes, pastures, lagoons and fields, along with crops and cattle, faced a serious threat [Reuters ibid, see also: http://moneytometal.org/index.php/EBX_Group].
At a Quilombo Alert meeting held in Rio de Janeiro in October 2013, the representative of Deserto Feliz Quilombo stated that, a new port to be built alongside the current Açu Port “will bring damaging and potentially catastrophic consequences to the community, as fishing and natural oyster farming in the area will have to stop”. [Rioonwatch, 8 November 2013].