Brazilian company Vale SA, the world’s largest iron ore mining company, said the sale of a 30 per cent stake in its subsidiary, Vale Oman Pelletising Company (VOPC), to an Omani government firm was a strategic move aimed at helping greenfield industries develop in partnership with local authorities.

Oman Oil Company bought the stake for $125 million. Vale holds the remaining 70 per cent of the shareholding.

The iron ore pelletising pant is scheduled for a start-up in late 2010 with commissioning by mid-2011. Annual production capacity is 9 million tonnes of direct reduction iron ore pellets but this may be expanded in the future.

The pelletising plant is part of a large industrial complex that includes an iron ore distribution centre with capacity to handle up to 40 million tonnes of iron ore and pellets annually. The raw iron ore will be imported mainly from Brazil for processing and export to steel makers in regional markets. The complex is Vale’s first greenfield iron ore project outside Brazil.

Oman Shipping Company is constructing four very large ore carriers (VLOCs), each with a capacity of 400,000 tonnes to be leased to Vale to carry iron ore from Vale’s mines in Brazil to Sohar.

Commenting on the purchase of the minority stake in VOPC, Mohammed bin Nasser Al Khusaibi, secretary general of Oman’s economy ministry, said the project not only diversified Oman Oil Company’s investment portfolio but also supported the future development of the iron and steel making industry and downstream businesses in Oman.

Roger Agnelli, CEO of Vale, commented: “Oman Oil Company is a key partner with Vale in this region and this agreement is a perfect example of Vale’s global business strategy of forming long-term partnerships with key local players to support the development of large-scale greenfield projects.

“Vale acknowledges with special thanks the key role of the Government of Oman in creating a positive business environment promoting major industrial investments like this plant and for its strong support for the development of this project over several months.

“We see the pellet plant and the distribution centre playing an important role in the sultanate’s efforts to diversify the Omani economy and to help promote more foreign private sector investment. Vale believes that the transaction with OOC will also enhance our role in the region’s iron and steel market, creating substantial value for our shareholders and for the Omani community.”

Supporting the downstream

Meanwhile, Jamal T Aziz, CEO of the Port of Sohar and COO of Sohar Freezone LLC, said the pelletising plant along with Shadeed Iron and Steel, which is also under construction, would play a significant role in the development of a downstream cluster in the free zone.

“All the ingredients are there that make a downstream steel cluster an attractive proposition – raw material, feedstock, a deepwater port, connectivity to regional markets, a workforce that can be trained and so on. We are in a far more favourable position than others in this regard,” said Aziz.

“Studies we had undertaken indicate a sizeable gap between the demand and supply of different steel products in the Middle East and North African region. This is also one of the reasons why companies like Vale decided to establish themselves in a growing region.”