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London-based mining giant Anglo American (LON:AAL) announced Friday it is selling its 70% stake in the Amapa iron ore operation in Brazil to Zamin Ferrous.
The move highlights major global mining companies efforts to keep focusing on higher-priority assets. Anglo itself has divested more than $5bn in non-core operations since 2009.
The company said the terms of the transaction were confidential and that the deal was subject to state regulatory approval.
But sources familiar with the matter, cited by Financial Times (subscription required), said the mine is worth about $300 million.
The transaction will allow the miner to focus on its flagship Minas Rio project in Brazil, where the miner has battled rising costs and permitting delays.
Minas Rio has long been said to be the main concern of Anglo’s board with the performance of outgoing CEO Cynthia Carroll. However, the fact that the company admitted in November the iron ore project would cost $2 billion more than expected, indicates how seriously project management was lacking.
Initial project capital expenditures of $3.6 billion have been revised on more than one occasion since Minas Rio was acquired in 2007 and now the mine’s final bill is predicted to come in at a whopping $8 billion.
Some analysts put that figure at $8.8 billion thanks in part to the fact that Anglo has to compete with Brazil’s infrastructure projects associated with the Olympics and soccer World Cup in 2014 and 2016.
Add the acquisition cost of $6 billion and Minas Rio turns into a minimum $14-billion project, becoming the world’s most expensive iron mine with costs of $350 per tonne according to SBG Securities. Compare that to current iron ore prices.
The sale of Amapa is expected to be completed this year.
