Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

Sul Americana de Metais (SAM) is postponing its $2.1bn iron ore project one year due to a delayed environmental license. The parent firm, China-based Honbridge Holdings, remains committed to the project.


The Block 8 iron ore project will extract low-grade iron ore, which has an average iron content of 20pc and transform the ore to a higher quality product at facilities in the northern part of the Minas Gerais state in Brazil. The processing applied to the low-quality iron ore will increase the ferrous content from 20pc to 66.5pc.


The initial project license was expected in Q2 2020, but due to the COVID-19 pandemic and request by various concerned agencies for further scrutiny by Ibama, Brazil’s environmental watchdog, the preliminary license is now delayed by one year. SAM’s spokesperson informed Davis Index that the preliminary license is now expected by mid-2021 with an installation license by the end of 2022 to start the phase two site development. The operational license, which will fully authorize the company to start the mining and conversion process, is expected by the end of 2025.


Annual ore production at Block 8 is estimated at 27.5mn mt. The facilities are expected to employ 1,100 workers once operational, while during the peak phase of the implementation stage, SAM will employ up to 6,200 workers.


Block 8 project is expected to minimize risk to workers and optimize performance by using remote-control machinery and robotic systems inside the active mining areas. Logistics within the site will be managed via a slurry pipeline which will be licensed, installed, and operated by an independent firm.


Due to serious dam catastrophes in Brazil over the past decade including the Mariana in 2015 and Brumadinho in early 2019, dam structural designs are facing new legislation to undergo a stringent acceptance process. To meet and exceed safety requirements for the tailings deposit system, SAM is establishing a raised dam to avoid the possibility of backlogs that might result in structural damage to the dam. SAM has also designed a retaining wall outside the future pit as a secondary safety precaution. Should the tailings structure ever endure severe stress and leak, tailings will be contained within the company’s premises and avoid damage to nearby communities.


Regional agricultural agencies have requested SAM and the government of Minas to establish a 950-acre irrigation project as part of the deal agreement. Crops such as corn will be in turn used in the form of starch in processes related to the ore. The irrigation and dam systems are designed to have 95pc of their used water to be recirculated and reused. Solar energy investments will be made by the company to achieve full reliance on renewable sources by the fifth year of mining operations. 

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