Brazilian firm Companhia Vale do Rio Doce (Vale) has signed an agreement to build a $1 billion iron ore pellet plant in northern Oman, the Gulf Arab's ministry of commerce said on Saturday.

Construction of the plant is expected to start at the end of the year and production would begin in 2010, the ministry said in a statement.

Sohar, located 250 kilometres north of the capital Muscat, is Oman's third-biggest sea port and is home to investments in aluminium, methanol and fertilisers projects and a refinery.-Reuters