SAO PAULO, June 23 (Reuters) - Vale, (VALE.N: Quote, Profile, Research)(VALE5.SA: Quote, Profile, Research) the world's largest iron ore producer, said on Tuesday it would begin to produce biodiesel from palm oil from 2014 to fuel its Carajas mine and railway operations in Brazil's north.

In a joint venture with biodiesel producer Biopalma da Amazonia, Vale plans to invest $305 million, with $40 million in 2009 alone.

The company plans eventually to use 20 percent biodiesel blend in the diesel consumed by its railway locomotives and large equipment servicing the Carajas iron ore mine, the company's main iron ore mine.

Vale, one of the largest consumers of diesel in Brazil, plans to hold a news conference on Wednesday in Rio de Janeiro on its new biodiesel project.

(Reporting by Reese Ewing, Camila Moreira; Editing by David Gregorio)