The S11D project: Strategically vital to Vale SA



S11D project

The Carajas Serra Sul S11D is located in the Carajas mining district in the Para region of Brazil. S11D stands for iron ore body 11, block D.

The S11D project is an iron ore mining and logistics project undertaken by Vale SA (VALE). The S11D project will increase the mining and processing capacity at Vale’s Carajas mining complex, where the company produces high-content ~67%  iron ore. It’s one of the most important components of the company’s strategy.

A total of $19.7 billion will be invested in the project, of which $8.08 billion will go toward the installation of the new mine and plant. The rest will be invested in logistics. It’s expected to be completed in the second half of 2016. When operating at full capacity, the project is expected to contribute around 90 million tons per year.

Efficient and low-cost production

As part of the Carajas complex, S11D has high-grade deposits and low costs. The cash cost per ton for producing iron ore from this project is expected to be around $15 per ton as compared to $23 per ton, company-wide. Favorable geology, truckless mining, and efficient processing on its new project will enable Vale to achieve this competitive cost profile.

The S11D project is an important way for Vale SA to increase its iron ore capacity while further reducing its overall costs per unit. It will help the company compete in the iron ore market where its rivals, including BHP Billiton Ltd. (BHP), Rio Tinto plc (RIO), and Fortescue Metals Group Ltd. (FSUGY), are each increasing capacities and undertaking restructuring efforts to reduce costs.

The SPDR S&P Metals and Mining ETF (XME) gives investors exposure to all of the stocks mentioned above.

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