Regulator opens investigation into suspension of works on Brazil's FIOL railway

Brazil's land transport regulator ANTT opened an investigation into the suspension of works on the first section of the FIOL railway, managed by iron ore miner Bahia Mineração (Bamin).

The FIOL project is divided into three sections, and the total 1,527km line will connect Ilhéus in Bahia state to Barreiras in Tocantins.

In 2021, Bahia Ferrovias, a unit of Bahia Mineração, won the 35-year concession for the 537km section 1.

Earlier in the week, Bamin, which is controlled by Kazakhstan's Eurasian Resources Group (ERG), announced the suspension of works with only 75% of the project completed.

"ANTT closely monitors the progress of the physical and financial execution of the project, as well as the fulfillment of contractual obligations. In February, ANTT notified the concessionaire about the below-expected performance in the progress of the works. Now, it will initiate a preliminary procedure to investigate a possible breach of contract," an ANTT spokesperson told BNamericas.

The suspension comes amid negotiations for the sale of Bamin.

ERG put Bamin up for sale last year, initially attracting interest from a consortium led by mining giant Vale. The consortium also included local mining company Cedro Mineração and development bank BNDES. In recent weeks, UK-headquartered Brazil Iron Mineração has also begun evaluating the acquisition of the firm.

The sale of Bamin ran into difficulties over financing the entire project, which includes the under-development Pedra de Ferro mine in Bahia state and the supporting logistics network, including FIOL and the Porto Sul port. 

According to an executive consulted by BNamericas, who is evaluating Bamin's assets, the necessary capex for the mine, the railway section and the port is estimated at US$6bn.

Bamin's suspension of the contract with local firm Prumo Engenharia for the construction of the FIOL section has already led to the laying off of 70 employees, according to representatives of labor union Sintepav-BA.

The 485km FIOL 2 section is under construction, and is in the hands of state-owned company Infra SA. The works have reached 70% completion and are expected to be finished in 2027.

The 504km FIOL 3 stretch is in the studies phase.