Bamin starts construction of Fiol Railway and Porto Sul

Two years after winning the tender for the construction of the  Fiol Railway (Ferrovia de Integração Oeste Leste), Bamin (Bahia Mineração) has just started its construction and is beginning to make the first interventions at Porto Sul in Ilhéus. So far, BRL 1.8 billion has been invested by the shareholder, according to the president, Eduardo Ledsham. Of this total, BRL 1.2 billion will go to the railway and BRL 600 million to the port. The company is controlled by Eurasian Resources Group (ERG) of Kazakhstan.

This is just a fraction of the company’s ambitious investment plan, which wants to increase its iron ore production in Caetité and make it possible to transport cargo by railway and port. On Fiol alone, BRL 5 billion in investments are planned, in total, over the 35 years of the concession – a value that includes the completion of the railway, already started by the federal government and the purchase of rolling stock. In addition, the company plans to build Porto Sul from scratch, which will require another BRL 6.7 billion in total.

For the following stages of the works, Bamin is still negotiating financing with BNDES and Banco do Nordeste, according to Ledsham. The expectation is that the release of the credit, which should correspond to 70% of the project, will be completed by 2024, according to the executive. “We have been talking for more than a year, and the expectation is to close the financing package in 2024,” he said. BNDES and Banco do Nordeste have not yet commented.

When asked about attracting partners to the project – a possibility that has been studied since before the auction but did not materialize -, Ledsham said that the group “is always open” but that there are no ongoing talks.

The section of Fiol operated by Bamin, which goes from Ilhéus to Caetité, had already been started by the federal government. Now, it will be up to the company to complete the project. The group decided to start work on a section of 127 km between Ilhéus and Aiquara (BA). Of the four sections that make up the railway, this has the lowest execution rate, with only 37% of the work done. In the others, the progress is 67%, 100%, and 68%, he said.

The start of the works, initially scheduled for 2022, was delayed due to the difficulty of closing the contract with the contractor, according to Ledsham. “The [infrastructure] sector today has a high demand, and, for a work of this volume, the market is still short of contractors.” Today, the group’s forecast is to deliver both Fiol and Porto Sul by the first half of 2027.

In the case of Porto Sul, so far, initial offshore interventions have been made, according to the executive. “We will start this year the opening of the quarry that will generate the blocks for the breakwater.” One of the obstacles to the construction of the terminal was the questions about the environmental impact of the port; however, the president says that the installation license has already been renewed for an additional six years.

The Porto Sul project foresees the construction of a terminal for iron ore and, then, another for grains – cargo that should have a considerable weight on Fiol.

When completed, Fiol can transport 60 million tonnes per year – of which 26 million tonnes will be iron ore from Bamin in Caetité.

Today, the Pedra de Ferro mine produces 1 million tonnes per year, and the company has already applied to increase the volume to 2 million. For now, the production is shipped by truck to a terminal 40 km away, where the cargo follows by the Ferrovia Centro Atlântica (FCA) from VLI. “It’s an expensive logistics, but it has the benefit of giving visibility to the product.” This year, the company signed a contract with Anglo American to supply iron ore.

As long as the transport depends on VLI, Ledsham estimates that the maximum potential will be 3 million tonnes per year due to the limitations of FCA. “The focus is to complete the project, which will make the mine viable.”

Bamin is still studying the possibility of partially anticipating the start of operations before 2027. The idea would be to transport the cargo by truck to a point on Fiol and, from there, to Porto Sul. The scheme would make it possible to expand the outflow to 5 million tonnes. “But we are still evaluating the feasibility.”

When asked about the interest in the auction of the other stretches of Fiol, which the federal government intends to connect with the North-South railroad in Figueirópolis, the executive says the project will be evaluated, but it is not the priority.

“Fiol 2 [the section from Caetité to Barreiras] is 52% completed, and the government is considering holding an auction in 2024.” For Bamin, it is an opportunity; having the same operator along the road also eliminates the need to discuss the right of way. However, our primary focus is on completing Fiol 1 and the port. We will evaluate when the time comes.”

Source: Valor Econômico

To read the original report, see: https://valor.globo.com/empresas/noticia/2023/07/19/bamin-comeca-a-tirar-fiol-e-porto-sul-do-papel.ghtml

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