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Brazil's Samarco Mineracao S.A. is looking at raising its 22 million metric-ton a year iron ore pellet capacity by 8.25 million tons with the construction of a new plant, a company spokeswoman said Thursday.

Samarco is jointly owned by Brazilian mining giant Vale S.A. (VALE, VALE5.BR) and its global competitor, Australia's BHP Billiton (BHP).

The new iron ore pellet plant would be located alongside existing units at Ponta Ubu on the coast of Espirito Santo State, near Vitoria.

The ore would be mined at Germano in neighboring Minas Gerais State and transported by pipeline to the plant.

The project, also known as P4P, would take around three years to build once shareholder approval has been given, the spokeswoman said.

Environmental licenses for the plant and infrastructure are expected to be granted next year.

P4P is likely to cost around $1.6 billion.

The Ponta Ubu port terminal, with current capacity of 23 million tons a year, would be expanded to 33.5 million tons a year, Samarco said.

Studies for the new plant began shortly after Samarco's third plant, P3P, was built in 2008.

The world economic crisis, which worsened in September last year, led to Samarco slowing down the P4P project by a year, the spokeswoman said.

Company President Jose Tadeu de Moraes said in August that Samarco was now producing at the same rate as before the global economic crisis.

The return to full output was due to a recovery in demand from Asian steel mills.

Asia accounts for 40% of Samarco sales followed by the Middle East with 28% to 30%, Moraes said. Europe accounted for 18% and the Americas 12%.

The recovery in Europe was slower than in Asia, he said.

Last year, Samarco produced 16.2 million tons.

Samarco exports all its production and has between 10 and 15 clients, each with demand over 1 million tons a year.

-By John Kolodziejski, Dow Jones Newswires; 55-21-2586-6086; John.Kolodziejski@dowjones.com