(Reuters) - MMX Mineração e Metálicos SA (MMXM3.SA) plans to invest 4.6 billion reais ($2.36 billion) over two years to complete Serra Azul, a mining project expected to more than triple the company's iron ore output, the company's chief executive told Reuters on Friday.
The company has already spent 200 million reais on the project, located in Brazil's southeast highland state of Minas Gerais, and expects to produce 29 million tonnes of iron ore from its mines, CEO Guilherme Escalhão said.
Rio de Janeiro-based MMX, part of Brazilian billionaire Eike Batista's EBX mining, energy, naval construction and transportation group, is seeking to cash in on rising world demand for and shrinking supplies of high-quality iron-ore, especially in China.
The company plans to produce 8.4 million tonnes of iron ore this year and produced 7.5 million tonnes last year from its other mining projects in Brazil.
MMX recently raised its outlook for Serra Azul to 29 million tonnes of ore a year from 24 million and increased the total amount it will spend on the project 20 percent to $4.8 billion from $4 billion. It is scheduled to open in 2014.
"Moving ahead with our geological knowledge of the mine, in the process of certifying reserves, in the engineering, we identified some opportunities to improve the project," Escalhão said. "This obviously resulted in adding new equipment."
The mine has an estimated 1.9 billion tonnes of iron reserves, enough for more than 65 years of output at full capacity.
Serra Azul is also being designed to produce marketable ores even at relatively low iron-content levels. As the most promising mines in Brazil and abroad become depleted, iron content is dropping in many mines.
Serra Azul is expected to produce ore with about 57 to 58 percent iron, he said. That compares with 65 percent or more at many Brazilian mines run by Rio de Janeiro-based Vale SA (VALE5.SA), the world's largest iron-ore producer.
The mine and its facilities will be capable of dealing with iron-ore with only a 36 percent iron content, Escalhão said.
"We will recover minerals that would not be recoverable in a normal mine, allowing us to recover more ore by using less," he said.
An environmental license granted in April allows the beginning of construction of an ore-processing plant at Serra Azul.
When complete, Serra Azul, located in the "Iron Quadrangle" area of Minas Gerais, will have a railway terminal linked to the mine by long-distance conveyor belt, electricity systems and water works.
The increase in spending on the project is also part of plans to link Serra Azul to the neighboring Pau de Vinho mine and both mines to MMX's Superport Sudeste, an iron-ore export terminal being built outside of Rio de Janeiro.
Owned by Usiminas (USIM5.SA), the Brazilian steelmaker, Pau de Vinho will be operated for 30 years by MMX.
Superport Sudeste will be able to export 50 million tonnes of iron ore a year to markets worldwide in a first phase scheduled to begin in 2013.
MMX has plans to later double capacity to 100 million tonnes, or about a third of Brazil's current iron ore exports and about 10 percent of the world's total sea-borne iron-ore exports.
MMX shares rose 1.25 percent to 8.13 reais in Sao Paulo trading on Friday. The benchmark Bovespa index of the Sao Paulo exchange's most-traded stocks fell 0.48 percent.