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Anglo American will mine iron ore from the mountain ranges of Serra do Sapo and Itapanhoacanga, in Brazil’s Minas Gerais state.
Mining giant Anglo American (LON:AAL) has received a licence from Brazil’s environmental agency Ibama to start production at its long-delayed and three times more expensive than originally expected Minas Rio iron ore project.
The massive operation, which includes a pipeline and port, will focus on the ore deposits located in the mountain ranges of Serra do Sapo and Itapanhoacanga, in the country’s Minas Gerais state.
Anglo anticipates an output of around 11 million tonnes to 15 million tonnes. It has plans to raise the capacity to 26.5 million tonnes a year in 2016 and continue till the end of its mine life of 28 years, Isto e Dinheiro (in Portuguese) reported.
Last week the company was granted an operating license for the 525-kilometer pipeline that will carry the iron ore, mixed with water in a slurry, to the company’s ore docks at the Port of Ac in Rio de Janeiro.
Pipeline construction.
Minas Rios, Anglo’s major capital allocation fiascos of recent years, forced the company to take a $4 billion writedown in 2013 and it was largely responsible for former CEO Cynthia Carroll’s deteriorating image.
Despite logistical headaches that caused a five-year start-up delay Anglo has remained committed to the project. The miner has spent $2.2 billion in 2014 on the project, with another $1bn marked for next year, which will take the total capital cost of the project to $8.8 billion, way over its original $3.6bn budget.
The news come at a time when iron ore prices have plunged 40% this year, the worst performance across metals and bulk commodities in 2014, throwing miners’ strategies into doubt and threatening an industry shakeout.
From an average price of $135 per tonne in 2013, the benchmark iron ore contract sank last week to less than $80 for the first time since the global financial crisis on oversupply and concerns about a slowdown in demand from China, the world’s biggest steelmaker and consumer of seaborne iron ore.
Prices are 40% down this year.
Images: Screenshots via YouTube.
5 Comments
Paulo Sousa
And so the price will keep going down…
Jae Park
Shareholders in the every iron ore company must stop the expanding of the productions from now for few years.
Chris Armstrong
What is the ore grade? Pipelining direct shipping ore? $8.8 billion
and no concentrator? Sure as heck does NOT seem to add up.
Obviously, I am missing something BIG – what is it?
Itabirite
I hope it is eventually cash positive, but it will never show a ROI. Basically paid to way too much for a greenfield deposit with zero infrastructure, poor due diligence, shoddy planning, and clueless execution.
Itabiro
If the profits would be between 15 to 20 US$/ton (that would not easy with the
trends of the Iron price and the higher production costs), And If the
production is 26,5 Mton/year of iron concentrate; in 10 years those profits
would be approx. from 4 to 5 Bi US$.
If the investment was 8.8 Bi US$ without consider taxes and banking costs.
Could this mining operation pay the project investment??