Anglo's Brazil Minas Rio Mine Start-Up Delayed To 2013-Source

7th Jul 2010 17:53

By Diana Kinch Of DOW JONES NEWSWIRES RIO DE JANEIRO (Dow Jones)--International mining giant Anglo American PLC (AAUKY, AAL.LN) faces fresh start-up delays at its huge Minas Rio iron ore project in Brazil due to land-tenure issues, a person involved with the investment said. Start-up of the 26.5 million metric tons-a-year mine won't occur until 2013, pushed back from the previously announced 2012, because of problems purchasing land for passage of an ore slurry pipe that would run more than 500 kilometers and is central to the operation, the person said. Anglo American bought Minas Rio as part of a $5.5 billion Brazilian iron ore assets package from local billionaire Eike Batista at the peak of the commodities market boom in early 2008. The idea was to massively boost Anglo's global presence in iron ore. The subsequent global economic crisis, when iron ore demand slumped, and environmental licensing hitches, meant hopes for a 2010 start-up were pushed back to 2011, then to the second half 2012, which was the date Anglo's Chief Executive Officer Cynthia Carroll announced in February of this year. "Now we don't see it starting till 2013," a person involved in the initiative told Dow Jones Newswires. "The problem is land access. We're having to negotiate with about 1,500 landowners." The company needs to purchase small holdings and properties to allow passage of the slurry pipe, which will carry ore mixed with water from the mine in Minas Gerais state to the coast in Rio de Janeiro, where it may be processed into steel or exported. Many properties along the route don't have registered ownership deeds, which makes it hard to determine who the rightful owners are, especially when the original tenants are deceased, according to the person. Heavy expenses have accrued at the project since the original purchase, at a time when Anglo is being forced to cut costs globally due to the worldwide financial crisis. To date, Anglo has had little luck attracting a partner to share costs at Minas Rio, which it said was a possibility last year. In February, Carroll announced the cost for the first phase of Minas Rio, to reach 26.5 million tons-a-year capacity, had jumped 41% to $3.8 billion from the previous $2.7 billion, on logistics and exchange rate considerations. Extensive site drilling, however, has enlarged reserves to nearly 5 billion tons of ore, indicating the project could eventually grow to an annual capacity of 80 million tons of high grade ore, she said at the time. At Amapa, an Amazon region project Anglo also bought from Batista, Anglo reported a $1.5 billion impairment charge in its 2009 earnings due to problems ramping up and expanding production in view of lower than anticipated iron grades at the site. -By Diana Kinch, Dow Jones Newswires; 55 21 2586 6086; [email protected] (END) Dow Jones Newswires July 07, 2010 12:53 ET (16:53 GMT)