(Updates throughout with background on project, further details, analyst comment)
--Vale receives "landmark" installation license for Carajas railroad expansion
--License allows for construction work and vegetation removal along 786 kilometers of railway
--Barclays analyst sees news as "marginally positive;" Vale's shares rise 0.9% on the news
By Paul Kiernan
RIO DE JANEIRO--Brazilian mining giant Vale SA (VALE, VALE5.BR) said Monday it received a key license to expand its Carajas railroad, linking the world's biggest iron-ore mine with a major port in northern Brazil.
Brazil's environmental and natural-resources institute, known as Ibama, granted Vale an "installation license," allowing for expansion works along 786 kilometers of railway and for the associated removal of vegetation, the company said.
The license removes one of several major regulatory hurdles to Vale's $19.5-billion project to develop the Serra Sul, or S11D, mine at Carajas, in the Brazilian Amazon. More than half of the project's budget--$11.4 billion--will be used to prepare the 892-kilometer Carajas railroad and the Ponta da Madeira port terminal in northern Maranhao state to handle Serra Sul's production of 90 million metric tons of iron ore per year.
Vale, one of the world's largest mining firms,said the issuance of the installation license is "a landmark in S11D's execution process." The Carajas railway expansion is slated to be finished by 2017, and Serra Sul should be producing at full capacity by the end of that year.
Leonardo Correa, a mining analyst at Barclays Capital, said he sees the license as "another important de-risking event for Vale's future growth in iron ore" and characterized the news as "marginally positive." Delays and complications involving licensing have been "a major hurdle for miners" in Brazil, he noted.
The installation license was expected within 12 months after Ibama granted Vale its preliminary license for Serra Sul in June. The latter permit is considered more difficult to obtain.
Vale's shares in Sao Paulo recently traded 0.9% higher at 34.96 Brazilian reais ($16.87).
-Write to Paul Kiernan at [email protected]
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