As the iron ore rally continues, the largest reserves in the world remain stalled because of lockdown and unable to jump on the high prices wave.

El Mutun, in Bolivia, is estimated to contain 40 billion tonnes of high quality iron ore, but it’s a textbook case of how geography and lack of infrastructure can limit this mineral’s exploitation.

Empresa Siderurgica del Mutun (ESM), the state company created to manage the mine, has only exported for the past three years 100,000 annual tonnes of iron ore to a single client, ArcelorMittal, says CEO Milko Moreno in a conversation with MM Steelclub. They’re able to deliver concentrates grading 67% iron, the highest level on the planet. However, Moreno estimates the mine’s maximum capacity to stand at 3 million tonnes per year, in the best of cases, due to geographic limitations.

“It’s not output that defines our capacity but the shallow depths of rivers of the Rio de la Plata Basin”, he says. Landlocked Bolivia depends mostly on Chilean ports to export, but El Mutun deposit lies on the opposite side of the country, near the border with Brazil and Paraguay, surrounded by the Amazon rainforest. This makes rivers the only option for transport.

“We have to move the cargo using a road that doesn’t exist: it’s a 100-kilometre dirt track to a Bolivian river port that has an unstable flow”, he explains. “But the main problem is that rivers flowing to Uruguay or Argentina are no deeper than 34 feet. They’re tiny next to the 60-to-80-feet-deep rivers near the Brazilian Carajas Mine”, explains Moreno. “In Carajas, they can easily load between 180,000 and 300,000 tonnes per ship. We can’t load more than 45,000 at a time”.

ESM was to triple exports in 2020 to 300,000 tonnes, but then Covid-19 came into the scene. The strict lockdown imposed by Bolivian authorities in March was moved to a “dynamic” one in June, allowing regions to lift or maintain restrictions depending on how the pandemic is evolving in their territories. Exports from El Mutun iron ore deposit were halted in March and although there are plans to resume operations on 2 July, Moreno says this, along with the decrease of water levels in the basin, will make it hard to ship more than 250,000 tonnes this year.

Another project delayed by the pandemic has been the construction of a steel mill at El Mutun. Works had started in January but had to be paused in March and Moreno hopes they can be resumed in July. ESM expects to compensate its geographic difficulties with steel production for the domestic market. Chinese company Sinosteel is in charge of the US$440-million initiative, which is to meet half of the Bolivian steel demand with an annual output of 200,000 tonnes.

“We have this cheap commodity that is becoming interesting to trade in high volumes, millions of tonnes. But that’s something the waterway can’t handle. So our strategy is to focus on those steel mills that require high quality iron ore”, says Moreno. El Mutun’s 67% iron concentrates have very little sulphur and “bearable” levels of phosphorus, which turns it into one of the few mines in the world that can reach that quality “without much hustle”, according to Moreno.

He believes focus on this kind of mills will help El Mutun reach that 3-million-tonne capacity he estimates. “In a world where a billion tonnes of iron ore are traded every year, that’s nothing, it’s inexistent”.

“But for specialised steel mills, we can exist”.