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“Told you so” seems to say Cutifani.
Mining giant Anglo American (LON:AAL) announced Monday it has delivered the first iron ore on ship from its Minas-Rio project in Brazil as Chief Executive Officer Mark Cutifani had promised: by year-end and within budget.
The first cargo of more than 80,000 metric tons of the steel-making mineral was loaded onto a chartered vessel at the port of Acu in Rio de Janeiro state and the vessel is en route to customers in China, the miner said.
Paulo Castellari, chief executive officer of Anglo American’s iron ore-unit in Brazil, said the project would ramp up to its capacity of 26.5 million tons per year over the next 18 to 20 months 2016 and continue until the end of its mine life of 28 years.
Work at Minas-Rio. (Image from archives)
Cutifani said that delivering the first ore on ship (FOOS) from Minas-Rio was one of the group‘s three major commitments to its shareholders this year.
“We believe that the outlook for our particular premium product remains attractive, despite the current weakness in the iron-ore price,” he said.
Not best timing
The news, however, come at a time when iron ore prices have plunged 40% since beginning of the year, becoming the worst performance across metals and bulk commodities, which has thrown miners’ strategies into doubt and it is threatening an industry shakeout.
From an average price of $135 per tonne in 2013, the benchmark iron ore contract has drifted below $80 a tonne. At the same time, freight rates are on the rise. But once the project is in full swing, analysts estimate that Anglo can get its ore on ship for about $35 per tonne.
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.
