The Brazilian Federal Government has signed a concession agreement with Eurasian Resources Group (ERG) Brazilian subsidiary Bamin for the completion and operation of a FIOL (East-West Integration) railway section.

Bamin will now take over the construction works, which until recently were executed by state-owned railway engineering and construction firm Valec.

The 35-year sub-concession covers an allowance of five years for the construction of the railway and three decades for operation.

Nearly $683m (R$3.3bn) will be invested in the railroad and the rolling stock by Bamin.

In April this year, Bamin secured the auction on the B3 (São Paulo Stock Exchange) to complete and run the first 537km segment of the FIOL railway.

As per the concession agreement, the company has 120 days to assess the progress of the construction and other linked works.

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By GlobalData

This preliminary stage will make way for the preparation of a plan to resume construction, which is expected to commence in the second half of next year.

Professionals in the rail industry have already been hired by Bamin to manage the FIOL railway.

This project will allow Bamin to leverage ERG’s international expertise as the largest transport operator in Central Asia.

Every year, ERG carries more than 50 million tonnes of freight on 10,000 vehicles, while also maintaining and revamping 2,500 wagons and more than 1,000 locomotives.

Bamin also aims to deploy more than 30 loading stations along the route.

These stations are expected to provide prospects for regional producers, improving production chains and helping to create new businesses.

Upon completion, FIOL will support the transportation of 60 million tonnes of freight annually.

The FIOL railway will connect the Pedra de Ferro mine in Caetité with the Porto Sul, which is undergoing construction in Ilhéus, Bahia.

After starting commercial operations in January, the Pedra de Ferro Mine is anticipated to produce one million tonnes by the end of 2021.

In addition, the South Port and FIOL are expected to be completed in 2026, allowing the mine to produce 18 million tonnes of iron ore annually.