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January 21, 2011

Vale project may cost up to RM14b

By TEE LIN SAY
linsay@thestar.com.my

Perak MB: It will likely start in July or August

IPOH: Brazilian mining giant Vale International SA's construction costs in its iron-ore transshipment project will be between RM9bil and RM14bil over a five-year period, and the project will likely start in July or August this year, said Perak Mentri Besar Datuk Seri Dr Zambry Abdul Kadir.

Vale has received the necessary planning and statutory approvals. It is now in the midst of drawing up the engineering plan.

While the Perak government has no equity participation in the project, it will participate in the port and logistics operations. There will also be co-sharing with local companies on the downstream activities. The multiplier effect of the downstream activities is expected to triple Vale's initial investment.

“Vale has agreed to bring more economic growth along that area. Local companies will be subcontracted to participate in the trickle-down activities. They will include Malaysian companies involved in iron ore, steel, fabrication, shipbuilding, canning and tin,” Zambry said.

Under the project, Vale will develop an iron-ore complex, including its own jetty in Teluk Rubiah, Lumut. Zambry said this would serve as an impetus for the development of iron ore and steel-related industries.

“This will be Vale's largest factory outside Brazil. All the necessary acquisitions have been made; it is just a matter of coming out to do it now,” he said.

He said the shipbuilding activities would take place along the beachfront from Lumut to Bagan Datok.

“Some of the local shipbuilders may build the smaller ships to transship the iron ore in the latter phase,” Zambry said.

The first of the two-phase Vale project will create jobs for 1,000 skilled workers. Over the entire two phases, Zambry said, jobs would be created for 3,000 skilled workers and a few thousand unskilled workers. The figures do not include the spinoff effects from the downstream activities.

“The Perak State Development Corp has started drawing up a value-chain roadmap based on the presence of the Vale project in Malaysia. We will identify and promote foreign and domestic direct investments using the project as a base,” Zambry said.

With Perak's strength in natural resources, he said the state was once again opening up the tin sector to increase its revenue. Perak stands to receive 5% in royalties from tin players.

“Tin prices have been increasing due to high demand and shortage of supply. We are now in the midst of considering applications both for licensing of exploration and concessions,” he said.

Currently, tin sector contributes some RM2bil a year to the country's gross domestic product.

Zambry said Perak still had untapped tin deposits and that evaluations were being made because some of those locations were catchment areas.

In 2009, a 30-year mining concession was awarded to Malaysia Smelting Corp Bhd subsidiary, Rahman Hydraulic Tin Sdn Bhd, for prospecting tin ore and other minerals in a newly identified 14,000ha in Pengkalen Hulu, near Ipoh.

In 2008, HWG Tin Mining Sdn Bhd secured a certificate to mine tin on a 202ha tract in Sungai Endah, Hulu Perak for 10 years until May 2018. HWG will start operations after Chinese New Year.

HWG is 51% owned by Ho Wah Genting Bhd, 35% by Jiwa Seribu Sdn Bhd, 10% by Majuperak Holdings Bhd and 4% by Multi Prolific Sdn Bhd.

Zambry expects jobs would be created for some 2,000 skilled workers and about 4,000 unskilled workers in the tin sector. The figures will increase when new explorations take place.

“We want to encourage tin players to move up the value chain. Currently, most are skewed in the lower part of the value chain, hence limiting returns,” he said.

The annual average price for tin in 2010 was US$20,447 a tonne, the highest recorded since the dollar-denominated trading on the London Metal Exchange (LME) began in 1989.

The average price was 50% higher than in 2009, the rise outstripping that of all the other LME metals. Prices recently have been stuck in a range of roughly US$25,000 to US$27,000 a tonne.