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Brazilian mining giant Vale S.A. (VALE, VALE5.BR) will begin a process of public consultation next Tuesday for its new steel mill project in southeast Brazil, the Valor newspaper reported Friday.

The 5-million-metric-ton-a-year steel mill will be built in Espirito Santo State. It scheduled for completion in 2014.

The public consultation involves talks with parties near the mill site to identify possible obstacles ahead of the environmental licensing process.

Valor said the information came from the Espirito Santo State secretary for economic development.

Vale was unable to comment immediately to Dow Jones on the story.

The mill, dubbed Companhia Siderurgica de Ubu, or CSU, is planned for a site south of state capital Victoria and close to the Samarco pellet plants in which Vale has a stake.

A previous plan to build a larger 10-million-ton, $3 billion mill in partnership with China's Baosteel (600019.SH) was abandoned in January in the same state because of environmental objections.

Vale's scaled down project is aimed at reducing the environmental impact, especially regarding water usage.

Vale now plans to recycle 97% of the water used in the new mill and is also studying seawater desalination as a source of supply.

Separately, ArcelorMittal Chief Financial Officer Aditya Mittal told Valor that his company is looking at taking part in mill projects of the type Vale is planning.

ArcelorMittal operates a 7.5 million-ton, flat-steel mill near Victoria.

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