Annual production at the new Bayovar phosphate mine controlled by Brazilian mining giant Vale SA (VALE, VALE5.BR) could eventually increase to up to 5.9 million tons of phosphate rock, Vale chief executive Roger Agnelli said.

However, Agnelli, speaking at the official opening of Bayovar's new phosphate mine Thursday, did not give a timespan for the possible production increase.

The mine, which is part owned by Mosaic Co. (MOS) and Mitsui & Co. (MITSY, 8031.TO), is due to have a maximum annual production capacity of 3.9 million tons of phosphate rock by 2012, the company said in a statement.

This year it is expected to produce about 1.0 million metric tons of phosphate rock, rising to 2.8 million tons in 2011. Full production capacity in 2012 is expected to reach 3.9 million tons, a Vale statement said.

Vale said Bayovar, in the province of Sechura in northern Peru, is one of the largest phosphate deposits in South America, and the project required a total investment of about $566 million.

Vale said the Peruvian greenfield operation will help strengthen its position as a major player in the fertilizer industry and boost supplies to Brazil. The company also said it will export to North America and Asia.

It said the demand for fertilizer is being spurred by food supply needs.

Vale has said Brazil currently imports about 90% of the potash and 53% of the phosphates it needs to make fertilizers.

In a statement last month, Vale said it had sold a 35% stake to Mosaic Co. for $385 million and a 25% stake to Mitsui & Co. for $275 million.

-By Sophie Kevany, Dow Jones Newswires; 51-198-903-8043; sophie.kevany@dowjones.com
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