Anglo American amends Amapá iron ore deal with Zamin Ferrous
25 September 2013
Diversified miner Anglo American Plc today said that it has revised an already agreed deal to sell its stake in Amapá iron ore operation in Brazil to Zamin Ferrous, run by Indian commodities investor Pramod Agarwal, after a landslide destroyed its shiploading infrastructure at Santana port.
In early January, the London-based miner agreed to sell its 70-per cent stake in Amapá to Zamin Ferrous for an undisclosed sum. The remaining 30 per cent is held by Cleveland, Ohio-based Cliffs Natural Resources.
But in late March, prior to the deal closing, a landslide destroyed its ship-loading infrastructure at Santana port and sampling tower which led to the loss of six lives.
The Brazilian government fined Anglo American for the accident but the miner said that there was no way it could have foreseen the geological event.
The landslide also halted all Anglo American iron ore shipments from the port.
In view of these circumstances, Anglo American said that it has entered into further discussions with its partner Cliffs and Zamin and Cliffs agreed to sell its stake to Anglo American.
Anglo American subsequently agreed to sell the entire 100 per cent in Amapá to Zamin for nearly $270 million in a deferred payment deal.
Jersey-based Zamin will pay an initial amount of $136 million and a deferred, conditional $130 million to be paid over five years, tied to the iron ore price.
Anglo American had acquired both the Amapa operation and Minas Rio in 2008 from Brazilian billionaire Eike Batista's MMX for $5.5 billion.
The company had Amapa on the block in October 2012 in order to focus on its much delayed Minas Rio - one of the world's largest iron ore mining projects.
Anglo American's internal assessment in 2011 had valued Amapa at $1.5 billion, which made its 70-per cent holding worth at least $1 billion. But the sale did not get the price since global iron ore prices have plunged since the assessment.
Amapá mine started commercial production in January 2010. Anglo American had last year raised output by about 30 per cent to 6.5 million tonnes a year, up from 2011 level of almost 5 million tonnes.
It has an iron ore offtake agreement with ASX-listed Beadell Resources.
Zamin has a strong portfolio of iron ore projects in Latin America and is a supplier of direct reduction and blast furnace iron ore pellet fines to the global steel industry.
Founded in 2005 by UK-based billionaire Agarwal, Zamin has four production, development and exploration assets, Valentines in Uruguay, Greystone, Zamapa and Susa in Brazil.
In 2010, it sold its 50 per cent stake in the Bamin iron ore project in Bahia, Brazil to its joint venture partner ENRC of Kazakhstan for $735 million.