Anglo American announces $4.0 bn hit on Brazil mine delay
Tuesday, 29 January 2013
LONDON: Anglo American announced on Tuesday a write-off totalling $4.0 billion (3.0 billion euros) caused by delays at its Minas-Rio iron-ore mining project in Brazil that have sent costs soaring.
The mining giant, which has been hit in recent months by slumping platinum output owing to fatal strike action by workers in South Africa, said that it would "record an impairment charge of $4.0 billion" in its 2012 earnings.
"We are clearly disappointed that the diversity of challenges that our Minas-Rio project has faced has contributed to a significant increase in capital expenditure, leading to the impairment we have recorded," chief executive Cynthia Carroll said in a statement.
"Despite the difficulties, we continue to be confident of the medium and long-term attractiveness and strategic positioning of Minas-Rio and we remain committed to the project," she added.
Anglo American said that capital expenditure for the Minas-Rio project could increase to $8.8 billion, citing higher construction costs and delays to the first deliveries of iron ore to late 2014 rather than this year.
"Minas-Rio is a world class iron ore project of rare magnitude and quality and represents one of the world's largest undeveloped resources," Carroll said on Tuesday, adding that the project's first phase would began at the end of 2014.
The project includes building a 525-kilometre (328-mile) pipeline that would transport iron ore slurry to the Brazilian coast.
Following the write-off announcement, Anglo American's share price rose 0.69 percent to stand at 1,885.50 pence in early trading on London's benchmark FTSE 100 index, which was up 0.10 percent to 6,299.38 points.
"Anglo American's $4 billion write down on Minas Rio appears in line with expectations," analysts at Investec financial group said in a note to clients.
Tuesday's announcement came only a few days after Anglo American said that its production of platinum had slumped by 29 percent in the fourth quarter of 2012 because of violence at its South African mines.
Meanwhile earlier this month, the miner named AngloGold Ashanti boss Mark Cutifani as its new chief executive to succeed Carroll, who announced in October her intention to step down as head of Anglo American in the wake of the unrest.
Also since the start of the year Anglo American, which is the world's biggest producer of platinum, announced plans to axe 14,000 jobs in a dramatic restructuring of its strike-hit South African operations.
The vast majority of job cuts, 13,000 in all, would be lost around Rustenburg, a city 110 kilometres (69 miles) northwest of Johannesburg that was the crucible of labour unrest that shocked the world last August and September.
Then, mineworkers' demands for higher wages crippled production across South Africa's mining sector and resulted in violence that claimed at least 50 lives amid a police crackdown. (AFP)