UPDATE 4-Vale pays $2.5 bln for African iron ore deposits

* Gives Vale access to high-quality iron ore in Guinea

* Vale seeking Africa opportunities, bullish on iron

* Operation Plans to export ore via Liberia

* Barclays’ analysts skeptical
(Adds analysts’ comment paragraph 7, production details,
paragraph 5)

By Brian Ellsworth and Saliou Samb

SAO PAULO/CONAKRY, April 30 (BestGrowthStock) – Brazilian mining
giant Vale bought a majority stake in a division of mining
company BSG Resources in Guinea on Friday, spending $2.5
billion to tap what it called “among the best deposits” of iron
ore in the world.

The move is significant for Vale (VALE5.SA: ) (VALE.N: ), the
world’s largest iron ore miner that is aggressively seeking
opportunities in Africa, and for Guinea, where a political
crisis has largely discouraged major foreign investment.

“Guinea will be a player on the world iron market within
four years and could be the No. 3 producer in six years,” Mines
Minister Mahmoud Thiam said. “This decision will also
kick-start other mining projects in Guinea.”

The acquisition will give Vale access to properties with
high-quality iron reserves that include the Simandou South
property known as Zogota as well as exploration blocks Simandou
North 1 and 2, the company said.

Output will begin in 2012 with 10 million tonnes of iron
ore and reach 50 million tonnes by 2015, Vale said.

It will pay $500 million up front for a 51 percent stake in
BSG Resources (Guinea) Ltd. and the remaining $2 billion in
subsequent payments over an unspecified period.

“This project is yet another indication of Vale’s bullish
views on the longevity of the iron ore pricing cycle, and the
structural iron ore story,” Barclay’s capital analysts said in
a research note, adding “Given the massive infrastructure
requirements…we are skeptical on the time-to-market of these
projects…”

AFRICA STRATEGY

The joint venture will renovate 660 kilometers (410 miles)
of railway on which Vale plans to export the ore via Liberia.

BSG Resources, with oil and gas projects in Russia and
Nigeria, copper, diamonds and iron ore mines in Africa, and an
engineering arm, is controlled by Israeli billionaire diamond
trader Beny Steinmetz.

Vale is making a big push into African iron ore.

In addition to the Guinea deal, Vale is in talks with
Liberia, Guinea’s southern neighbor, about a possible
concession there, and may seek a stake in the Belinga iron ore
project in Gabon.

The Belinga concession was awarded to a Chinese firm ahead
of Vale in 2006, but Gabon is reviewing the deal. Analysts
believe a Chinese company will lead the project and they expect
Vale to take a technical or environmental role.

In March, Chinese metals group Chinalco signed a joint
venture agreement with Rio Tinto (RIO.L: ) (RIO.AX: ) to develop
another iron ore project in Guinea.

The West African country is due to hold elections in late
June as part of its transition from military rule to democratic
government. Soldiers took power in Guinea in December 2008.

Investing Advice

(Additional reporting by Daniel Magnowski in Dakar, Elzio
Barreto in Sao Paulo; Denise Luna in Rio de Janeiro)
(Editing by Gerald E. McCormick, Lisa Von Ahn, Leslie Gevirtz
and Gunna Dickson)

UPDATE 4-Vale pays $2.5 bln for African iron ore deposits