UPDATE:Anglo American Minas Rio To Start Output Earliest In 13

30th Jul 2010 15:30

(Adds quotes and details) By Alex MacDonald Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Anglo American PLC (AAL.LN) is expected to start producing iron ore from its flagship Brazilian Minas Rio iron ore project in 2013 at the earliest, the company's chief executive said Friday. The Minas Rio project was originally expected to start producing iron ore in the second half of 2012 but has suffered setbacks primarily related to licensing and permits for its planned beneficiation plant, Cynthia Carroll said in a conference call with reporters regarding the company's first-half results. A beneficiation plant refines iron ore into grades of iron ore that have more ferrous content. Securing land for the slurry pipeline, which would transport the iron ore from the mine to the port, "does not represent a bottleneck" for the project, Carroll added. The company already has access to 84% of the land needed to build the pipeline, up from 54% at the end of last year. Analysts and investors are closely watching the development of the 26.5 million tons a year project because Anglo is now focused on driving profitability through organic growth. Anglo American wants to increase total output by a third across its key seven commodities by 2013. "Our near-term production growth is a clear differentiator for Anglo American and will be delivered by four major strategic projects that we are developing," Carroll said. Minas Rio is one of those four projects but has suffered setbacks due to license and permit delays as well as changes to the project. The company already has 23 out of the 33 critical licenses needed to complete the project. The remaining 10 licenses could in theory take an additional nine months to obtain, resulting in cost delays of $180 million a quarter. Anglo will incur a further $120 million in costs to change the scope of the project, it added. In total, the project's capital expenditure will increase by at least $750 million or 20% to $4.55 billion from the company's February estimate of $3.8 billion. Anglo American paid $6.5 billion at the 2008 peak of the commodities boom to boost its global presence in iron ore and has been slow to acknowledge it overpaid for the project and related Amapa iron ore system in Brazil. 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, the date Anglo Chief Executive Cynthia Carroll announced in February. Carroll said Anglo has "made good progress on those areas of the project where the necessary approvals have been secured" but noted that the Brazil's environmental permitting has become more rigorous and complex in recent years. Nevertheless, Carroll said the company has "considerable resource deployed to resolve these issues, including constructive high level dialogue with the authorities in Brazil. Once the remaining initial approvals are granted, we believe it will take 27 to 30 months to construct and commission the mine and plant and to deliver the first ore on ship." When asked whether Anglo would consider brining in a partner to the project, Carroll said Anglo has received a lot of interest from potential partners but noted that "we will consider a partnership at the right time as we think it is appropriate. Right now we continue to believe very strongly in the outlook" for the iron ore market. -By Alex MacDonald, Dow Jones Newswires; +44 (0)20 7842 9328; [email protected] (END) Dow Jones Newswires July 30, 2010 10:30 ET (14:30 GMT)