UPDATE 1-Brazil's Vale starts work on Peru phosphate mine

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By Teresa Cespedes

PIURA, Peru, Sept 5 (Reuters) - Mining giant Vale (VALE5.SA) RIO.N has started construction on a $479 million phosphate mine in Peru, company officials said on Friday, joining the list of Brazilian firms investing in Peru.

Vale won the bid to exploit a phosphate deposit in Peru's northern Piura region in 2005 and hopes to start production there by mid-year 2010.

The Bayovar mine has reserves of 238 million tonnes of phosphate, which is used in fertilizer, according to the government. The company hopes the mine will produce some 3.9 million tons of the rock annually.

The project also includes a phosphate processing plant and an export port. The company says most of the mineral mined will be shipped to Brazil, but some will stay in Peru to meet domestic demand.

Speaking at the project's inauguration, Tito Martins, a director at Vale, said the firm's investment in Piura could grow.

"We are studying the possibility of expanding and developing a project related to fertilizers," Martins said at a ceremony also attended by Peruvian President Alan Garcia.

Earlier this week, Brazilian steelmaker Gerdau (GGBR4.SA) (GGB.N) said it would pump $1.4 billion into its Siderperu unit in Peru over the next five years to boost output.

Other Brazilian firms with investments in Peru include: state-run energy company Petrobras (PETR4.SA), construction firms Norberto Odebrecht and Andrade Gutierrez and airline, Gol. (With additional reporting by Marco Aquino; Writing by Dana Ford, editing by Leslie Gevirtz)