24/06/2009 (Reuters), Rio De Janerio - Brazilian miner Vale will save an estimated $150 million in fuel costs starting in 2014 by producing its own palm-oil based biodiesel, the company said on Wednesday.

The $500 million joint venture between Vale and Brazil's Biopalma da Amazonia will produce 160,000 tonnes per year of biodiesel, eventually providing 20 percent of diesel consumption in its northern system.

Vale's direct of Energy Vania Somavilla said biodiesel currently available on the Brazilian market is made from soy, which is considerably more expense to produce.

"Making biodiesel from palm oil is ten times more productive than making it from soy," she said.

Much of the economy of the project comes from growing the palm and making the fuel in the Amazon state of Para near Vale's operations in the north of the country.

Vale, the world's largest iron ore miner, will continue using natural gas for its southern Brazil, she said.

The biodiesel will be used to power a fleet of 216 trains in its northern system operations along with heavy equipment used the massive Carajas mine.

The company in 2007 began using a two-percent biodiesel mix in its trains, and off-road trucks and for electricity generation, and last year upped this two three percent.

It is currently in test phases to run trains on a mixture of diesel and up to 70 percent natural gas.

Vale in 2008 used 940 million liters of diesel, making it one of Brazil's largest consumers of the fuel.