Picture: ISTOCK
Picture: ISTOCK

Rio de Janeiro  — Vale’s latest acquisition bolsters the argument it has made  for taking complete control of the shuttered Brazilian iron ore mine that it owns with BHP Group.

Vale announced on Tuesday the purchase of technology firm New Steel for $500m as it aims to boost output of high-grade iron ore products that have been fetching premium prices.

New Steel owns technology capable of improving production and waste storage at mines just like the Samarco joint venture with BHP.

“Vale makes its case stronger given that they would be the ones bringing the technology to the table that would help Samarco come back in a more cost-effective manner,” said Andrew Cosgrove, an analyst at Bloomberg Intelligence.

Vale, the world’s biggest producer of iron ore, plans to increase output of the high-grade iron product known as pellets, which is cleaner to process than cheaper grades of the mineral. Vale said it purchased New Steel to help improve pellet output in its southeastern mining system, the same region where Samarco’s operations happen to be located.

A key to New Steel’s technology is that it greatly reduces the space needed to store waste, Cosgrove said. Samarco will store waste in an open pit, but the plan has a shelf life of seven years, the company’s media department said. Vale says the joint venture should restart in 2020.

Vale, BHP and Samarco all declined to comment.

Samarco Mineracao, once the world’s second-largest producer of pellets, has been out of operation since a deadly 2015 dam spill. As its owners focused on cleanup and reparations, they discussed the future of Samarco behind closed doors.

Then in January Vale said publicly that it would be logical for it to become the sole operator as it owns nearby infrastructure. BHP has no other iron ore operations in the region.

Vale has toned down its ambitions since then, saying the priority is getting the permits needed to restart operations. Meanwhile, the price of pellets has surged in the past two years as China’s government rolls out strict air pollution limits that have forced its steelmakers to reduce emissions, something attainable by using higher quality ore such as pellets.

The company’s shares rose 1.6% in late-morning trading in Sao Paulo.