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Global mining finds ideal base in Oman

Interview - April 10, 2012
Vale Oman Pelletizing Co. CEO Marcos Beluco talks about how the company has invested a great deal in Oman, establishing a pelletizing plant and training and hiring local talent, and how the host country provides just the conditions the Brazilian mining heavyweight requires
Why did Vale choose Oman to set up their operations in the Gulf?

There are many reasons for which we chose Oman as a distribution hub for our operations. First of all, Oman has a very strategic location, right in the middle of the region and close to our main customers in the Middle East, North Africa, India and Asia.
Secondly, the country has a world-class industrial infrastructure and availability of competitive energy. Sohar Industrial Port is the only deepwater port in the GCC that has the capacity to receive the Very Large Ore Carriers (VLOC), which Vale operates. Vale decided to capitalize on Sohar's competitive edge to create a steel cluster with virtual mines. Vale invested US$1.36 billion to set up the Pelletizing Plant and Distribution Center. So after receiving iron ore from Brazil, we can distribute not only blended iron ore but also our pellets in smaller quantities to our customers in the region.

The virtual iron ore mine in Oman allows us to be close to our customers and to work according to their requirements. Vale owns some of the richest iron ore resources in the world and our materials come directly from Brazil. In our Industrial Complex, we can produce high quality clean pellets with zero-emissions. We have generated jobs for the local talent, in line with the country's Vision 2020 and the 8th Five Year Plan (2011-2015).
Thirdly, we have a strong relationship with the Omani government and they have been very supportive of our project. The country’s progressive foreign policies, flourishing national economy and supportive investment policies foster an outward-oriented export-culture.

Vale Oman's vision falls in line with the government’s efforts to diversify the economy by creating a strong industrial base. How significant is Vale’s contribution to the socio-economic development of Oman?

Vale believes in establishing a balance between economic and social development. We adhere to the Sultanate’s regulations and work in line with the government’s strategy to add value through our operations. We aim to develop the country through job generation, the development of the local supply chain as well social environmental investments.

Since 2007, Vale has invested US$2 billion in developing its operations in Oman. Could you point out the Vale Oman’s milestones?

Vale’s Pelletizing Plant and Distribution Center is one of the company's first greenfield projects for iron ore outside Brazil with a total investment of US$1.36 billion.
In December 2007, we opened our Middle East Representative Commercial Office in Muscat and in April 2008, we received our environmental permit and began the construction of our facilities. One month later, Vale entered into a partnership with the Sohar Industrial Port Company (SIPC) to rent the land in Sohar and build our 1.5 kilometer deep-water terminal. It is a dedicated port for Vale to handle its iron ore and pellets. The contract that we signed covers the use of the resources here as well. SIPC is an important partner and our investments with them amount to US$250 million.

In October 2008, we signed the gas supply agreement with the Ministry of Oil & Gas.

In November 2008, to demonstrate our commitment to developing the local supply chain, Vale signed a contract with the Oman Shipping Company (OSC) worth US$500 million to build four VLOCs, with the capacity of 400,000 tons each. These vessels will be dedicated to bringing iron ore from our operations in Brazil to Oman.

In August 2009, Vale recruited 124 newly graduated Omanis and entered them into an 18-month training development program as part of the company’s strategy to further empower local talent.

In May 2010, Oman Oil Company (OOC) acquired 30% of the Vale’s Pelletizing Company's shares. In October, Vale signed a Memorandum of Understanding with Vicosa Federal University in Brazil, to conduct agricultural studies on the effects and preventative measures of diseases and pests on mango, lime and date plantations in the sultanate.

In January 2011, Vale initiated a targeted recruitment plan focused on hiring individuals from low-income families in the Al Batinah region. The program enrolled 80 young Omanis who are currently being trained to hold various positions in the project.
In April 2011, we began producing pellets in our first line and exported to Saudi Basic Industries Corporation (SABIC) in July. In September 2011, the world’s largest iron ore bulk carrier, Vale Brazil, arrived in Sohar for the first time. It carried 400,000 tons of iron ore from Brazil to Oman.

In December 2011, we signed a cooperation agreement for Corporate Social Responsibility with Oman Oil Refineries and Petroleum Industries Company (ORPIC) and Sohar Aluminium. It is very important to drive our social investment together, particularly since we operate in the same area. This will allow us to make the most out of our efforts in terms of having a more meaningful impact and adding value to the lives of the communities where we operate. The corporation has four main focus areas: Education and Sports, Entrepreneurship, Education for Work, and Health and Environment. One work group has already been created to develop and support the community programs that will be implemented

In addition to all of this, Vale awarded a total of US$420 million in contracts to local companies, for the construction of our facilities.

On the March 3, 2012, we officially inaugurated our industrial complex in the presence of Mr. Murilo Ferreira, President and Chief Executive Officer of Vale Brazil thereby reaching full capacity.
Please elaborate on Vale’s efforts to contribute to the social development of the Al Batinah region by recruiting and developing the local human resources?

Vale is a global company that thinks locally. You have to blend international expertise with local know-how. It is important to be flexible—leave room for adjustment to fit the local setting. Training programs are inherently challenging, especially when you talk about transferring knowledge from the company to the locals. This is true wherever you are in the world.

We brought in experts from our operations around the world to train our Omani workforce here. Once the intensive 18-month program was concluded, the students were sent abroad for on-the-job training. Sixty-five young Omani men and women were sent to Brazil and 20 to Japan. When these Omanis came back to the country in 2010, they were ready to be employed in various positions within the project including operators, technicians and engineers.

Vale has reached 63% Omanization, which is 28% higher than required by the Omani government. That shows just how serious we are about expanding and enriching the local talent. When it comes to recruiting, we prioritize Omanis in the Al Batinah region. Half of our management is Omani. I am quite happy with what has been achieved. Our Omani workforce is doing extremely well.

Currently, Vale in Oman has generated 1,200 direct jobs of which 450 are Vale employees and 750 are contractors. The project has also added 3,120 indirect jobs to the market.

How significant is the MENA region market to Vale’s global operations?

Our main customers are located in Saudi Arabia, North Africa, India, and the United Arab Emirates (UAE). So far we have started distributing our pellets to Saudi Arabia and the UAE. Along with the Middle East’s prevalent growth is its increasing demand for steel, making it a critical market for the company. It is important for us to be here. We have to capture the market in the region. The distribution center in Sohar, together with the port and distribution center being built in Malaysia and the transfer station in Subic Bay in the Philippines, will enhance Vale’s competitive advantage of providing customers with a just-in-time logistic network.

What is your growth strategy for the coming years?

Right now, our production capacity is 9 million tons per annum (mtpa). We have plans to expand and double our capacity to 18 mtpa by 2018 with an additional investment of approximately US$1 billion.

Could you comment on the investments made in green technology in 2011?

In a bid to establish more environment-friendly operations, Vale has invested in green technologies throughout its operations. This included an investment of US$40 million to minimize the effects of emissions. We installed two fixed monitoring stations in the community where we operate before we began production. We have also conducted a comparative study to allow us to map out deficiencies and make the necessary improvements. We set up a 3,150-meter wind fence around the Industrial Complex to control dust emissions, and a state-of-the-art water recycling system to reuse 100% of our water and avoid discharges to the sea.

As a foreign investor in Oman, what has your experience been in terms of working with the government?

The government has been very supportive. In fact, it has highly incentivized the sector to draw in more investments, laying the foundation for economic diversification. Right now, what we have is a very stable country with a sound social, economic and political environment.
It is this kind of environment that made Vale decide to come to Oman. The government has been very helpful during the course of constructing our Distribution Center and Pelletizing Plant. It is our hope that these ventures would facilitate further downstream activities.
Vale believes in the government’s vision. It is here to add more value to the country and encourage more private sector participation in our downstream activities and our aim to support in the creation of a steel cluster.

As an expat, what is it that you like most about Oman?

The people of Oman are very friendly. Foreigners can expect a warm reception when they get here. I speak from experience—Oman is a great place to visit, work and is a nation that I have grown to love and now call my home.
I have said it before and I am saying it again—Oman is a highly stable country with a sound socio-economic environment and sustainable viewpoint. It has a long-term strategic plan, which aims to grow the country in a sustainable manner.
The changes in Oman are set to sustain the growth of the country. So far, we are seeing a highly positive trajectory. The country is full of opportunities and it is a very exciting place to be.