By Mariana Durao and Martha Beck
Brazil Iron Ltd. has made an offer of about $1 billion to buy a South American mine project owned by Eurasian Resources Group, according to a person familiar with the matter.

The closely held British company is seeking to acquire ERG’s Bahia Mineração, also known as Bamin, for its integrated mining and logistics project in northeast Brazil that includes an iron ore mine, a future deep sea port and rail link. Brazil Iron signed a non-disclosure agreement with Kazakhstan-backed ERG, said the person, who asked not to be identified discussing a private deal.

Brazil Iron declined to comment. ERG didn’t immediately respond to requests for comment.

The project has drawn interest from Brazilian metals producer Vale SA and the nation’s federal government, which has been trying to facilitate a deal in a bid to help develop infrastructure in the region. ERG’s initiative needs a 30 billion reais ($5.3 billion) investment to expand mining operations, build the port and finish a 527-kilometer (327-mile) stretch of railway linking the two, according to people familiar with the matter.

Bamin is expected to produce as much as 26 million tons of iron ore once fully operational.

Brazil Iron is relying on completion of the port and railway works to advance its own iron ore project about 135 miles northeast of Bamin. The company aims to ultimately produce hot briquetted iron, a feedstock for electric-arc furnaces that make low-carbon steel. Bamin is expected to produce as much as 26 million tons of iron ore once fully operational.

The offer by Brazil Iron would be enough for ERG to recoup most of its initial investment, one of the people said. ERG is one of the world’s largest producers of cobalt and chrome. Brazil Iron is based in London and counts Swiss-based Bank Julius Baer & Co. Ltd. among its top shareholders, according to regulatory filings.

Brazil’s government has been trying to arrange a deal for Bamin that would include Vale buying half of the project as part of a consortium, with Brazilian mining company Cedro Mineração taking a 30% stake and Brazil’s development bank BNDES holding the rest, according to people familiar with the discussions. The government sees the railway section as top priority since it cuts through 19 municipalities in Bahia state and would be able to handle cargo for industries including agriculture and mining.

The federal government is willing to contribute 5 billion reais to help finish the railroad and BNDES may finance part of the investment, the people said.

Vale is still assessing the economics of a Bamin takeover and there’s skepticism on the company’s real interest in the project, said a person involved in the discussions. Chief executive officer Gustavo Pimenta said last month it was too early to say if Vale will pursue an acquisition.

When asked Friday if Vale is still looking at Bamin, a representative cited a Jan. 20 statement that said the Rio de Janeiro-based company assesses investment opportunities in the regular course of its activities.