RIO DE JANEIRO -(Dow Jones)- Brazilian miner Vale (VALE,VALE5.BR) is working on an accord with the Guinean government by which it will concede 35% of its Simandou iron ore project to the government in line with new mining laws introduced in the country, according to a manager at Vale.
Vale's expected accord with Guinea would be in the same mould as the agreement recently struck between rival Rio Tinto PLC (RT.LN)and the Guinean government on Rio Tinto's iron ore project in the same area, the manager told Dow Jones Newswires in an interview.
Last month Guinea's government announced adoption of a new mining code allowing it to increase its participation in projects run by commodities companies operating in the country to 35% from the previous 15%, to boost revenues from the country's rich iron ore and bauxite resources.
The government had already struck in April an accord with Rio Tinto to take a 35% stake of the iron ore project Rio Tinto is developing at another part of the rich Simandou deposit.
"Vale's working on an accord in Guinea in the same mould as Rio Tinto's," said the manager.
Vale said in late 2010 that developing the high-quality Simandou project--in which it is a majority partner in a joint venture with a local company--will allow it consolidate its leadership of the global seaborne market for high-grade iron ore. The company said it is spending $861 million in 2011 on developing its Simandou project, which is planned to start up in the second half of 2012 to produce two million metric tons a year, rising to 15 million tons in 2015 and full capacity of 50 million tons a year in 2020 of ore with a high iron content, comparable to the quality of its Carajas mine in Brazil.
The miner is also investing in rail infrastructure in Guinea to transport the ore.
Brazil's business newspaper Valor Economico reported Monday that Vale is also assessing another alternative to the government's taking 35% of Simandou, without saying where it got the information. This option would involve the government continuing with a 15% stake while Vale would agree to pay a special tax on profits made at the mine instead of ceding an additional 20% stakeholding in the project.
A Vale press officer at the miner's Rio de Janeiro headquarters said the company had no comment on the Valor report.
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