Anglo American not to sell stake in Minas-Rio iron ore project
26 October 2013
Diversified miner Anglo American Plc plans to retain full ownership of its much delayed Minas-Rio project in Brazil due to the recovery of global iron-ore prices after a slump that forced several miners to delay developing their iron ore mines.
''We're not keen to motor too quickly'' on a partnership, Mark Cutifani, CEO of Anglo American told Bloomberg in an interview in Johannesburg yesterday. ''The way things are going and the better it looks, the more inclined I am to stick with it ourselves.''
Earlier this year, the London-based miner had said that it would look for a partner to develop the Minas-Rio project after being forced to write down the value of the project by $4 billion due to cost overruns. (See: Anglo American writes down $4 bn over Brazilian project delay)
Anglo American had acquired the Amapa operation and Minas Rio in 2008 from Brazilian billionaire Eike Batista's MMX for $5.5 billion when iron ore prices were at their peak.
However, the project was bogged down by delays and cost overruns that forced the company's chief executive Cynthia Carroll to resign under shareholders pressure in late 2012 (See: Anglo American CEO Cynthia Carroll resigns under shareholders pressure).
According to the company's latest estimates, capital expenditure for the Minas-Rio project is expected to be around $8.8 billion.
Anglo American has so far spent around $3.8 billion its development excluding the acquisition costs, with another $5 billion planned for its completion.This is over thrice the original capital expenditure forecast of $2.6 billion five years ago.
Nevertheless, the miner is hopeful of shipping its first iron ore cargo by the end of 2014.
The project involves construction of a state-of-the-art open-cast iron ore mine and beneficiation plant in the states of Minas Gerais and Rio De Janeiro with an initial capacity of 26.5 million tonnes per annum of iron ore pellets, a 525-km pipeline for transporting slurry from the mine to the port and loading facilities at Port of Acu on the eastern coast of the country.
The company has faced major problems related to acquisition of numerous licences and accession of land for its slurry pipeline.
According to Anglo American, Minas-Rio is a world class iron ore project with an estimated operating cost of approximately $30 per tonne over the life of the mine, which is highly competitive.
''The price of iron ore has been doing a little bit better than before,'' Cutifani told the paper. ''That's good news. China has been doing pretty well. We're happy to be where we are today, albeit disappointed at what we had to pay for the project overrun.''
Cutifani said that he is even now open to sell a part of Minas-Rio project if it creates value for shareholders. ''We had a number of people who said they'd be interested in having a chat, so we're still open.''