Australia’s biggest iron ore rival in Brazil says it will supply large volumes of new supply long before Rio Tinto and Chinese companies can unlock a big new province in Africa.

As Australian miners and investors enjoy bumper profits and dividends from high iron ore prices, Brazilian miner Vale revealed on Friday that its board would soon consider an expansion of its biggest and best mine amid “amazing” Chinese demand for the commodity.

Additional supply of iron ore threatens to flatten buoyant prices for the commodity. Louie Douvis

Expansion of Vale’s flagship S11D mine would come on top of the company’s ambitious plan to restore within two years the 100 million tonnes of iron ore capacity that was lost over the past 18 months to catastrophic dam collapses and coronavirus disruptions.

Additional supply of iron ore threatens to flatten buoyant prices for the commodity, which have provided the Australian government with better than expected revenues when the pandemic has savaged company tax inflows from other sectors.

As if slighted by the iron ore industry’s recent focus on the threat posed by Guinea’s nascent Simandou iron ore province, Vale said on Friday it planned to restore its shuttered capacity by 2022.

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”Vale is the only company that can bring back almost 100 million tonnes in the next two years,” Vale’s iron ore boss, Marcello Spinelli, said in response to a question about Simandou’s potential.

“We’ll be back.”

For context, Australian miners collectively exported about 852 million tonnes of iron ore in the year to June 30.

The expansion at S11D is expected to initially be 10 million tonnes of extra annual capacity, but Vale is understood to be studying ways to bring on a further 20 million tonnes of new capacity.

”We are developing another possibility … another 20 [million tonnes],” Mr Spinelli said.

”We’re going to submit this as soon as possible to our board.”

Like Simandou, S11D typically produces ore with higher iron grades than that produced in Western Australia by Rio, BHP, Fortescue Metals, Roy Hill and Mineral Resources.

But Vale’s tough talk will be taken with a grain of salt by Australian miners, given Vale’s reputation for being optimistic about its ability to resume mining in areas where its failed dams killed hundreds of people.

Vale cannot resume the production without the support of Brazilian regulators, who have been slower to approve restarts than Vale initially expected.

Significant work is also required by Vale to introduce “dry” waste disposal systems that are less likely to collapse than the company’s traditional ”wet” tailings.

Hundreds died after the catastrophic failure of Vale’s Brumadinho tailings dam in Brazil in January 2019. Steve Yolen

Vale has already been slower to resume shuttered production than was expected under the three year recovery plan it unveiled in May 2019.

After further questioning on Friday, Vale confirmed its resumption plan was to achieve export “rates” of 400 million tonnes some time in 2022, not necessarily export 400 million tonnes in that year.

Vale has always planned to produce more iron ore in the second half of 2020 than its extremely weak first half, and said that alone would weigh on iron ore prices in coming months.

”The price is high, we don’t see a support for the price and the short-to-mid term, actually. Remember that we are now bringing more than 50 million tonnes to the market [compared with the past six months],” said Mr Spinelli.

Simandou has been on the backburner for much of the past decade because of ebola virus outbreaks in Guinea, allegations of political corruption and, most significantly, the high cost of building transport infrastructure for a mine that would be 650 kilometres from Guinea’s coast.

In 2011 Rio was planning to spend more than $US10 billion on development of Simandou to create a mine with initial capacity of 95 million tonnes that would be in production by 2015.

But interest in the iron-rich mountain range was revived last year when a Chinese consortium, SMB Winning, secured two iron ore tenements adjacent to those held by Rio and its partners.

SMB Winning has flagged an 80 million tonne per year project costing about $US14 billion ($19.4 billion).

Fortescue does not expect to face competition from Simandou iron ore within the next five years, while Rio chief Jean-Sebastien Jacques said it could make sense for Rio’s Simandou tenements to be combined with those of SMB Winning.

Mr Jacques added that Simandou would eventually compete with Australian iron ore mines, regardless of whether Rio was a participant.

In a note to clients, UBS said it believed the cost of each new tonne from Simandou was three to four times more expensive than developing replacement mines in WA.

UBS said the entry of 80 million tonnes of new iron ore from Simandou did not significantly alter its prediction for iron ore prices to average $US55 per tonne in the long term, which is also the federal government’s forecast price for the commodity.

Iron ore was fetching $US110.58 per tonne on Friday.