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AngloAmerican confirms Minas-Rio capex and records $4 billion impairment
Anglo American plc (“the Company”)
Incorporated in the United Kingdom
(Registration number: 3564138)
Short name: Anglo
Share code: AGL
ISIN number: GB00B1XZS820
29 January 2013
AngloAmerican confirms Minas-Rio capex and records $4 billion impairment
Anglo American plc (“Anglo American”) has completed the detailed cost and schedule review of
its Minas-Rio iron ore project in Brazil announced in November 2012. The review included third
party input and examined the outstanding capital expenditure requirements in light of current
development progress and the disruptive challenges faced by the project. The review included
a detailed re-evaluation of all aspects of the outstanding schedule, with a focus on maximising
value and mitigating risk.
Following its November 2012 guidance and the completion of the review, capital expenditure
for the Minas-Rio project is projected to increase to $8.8 billion, if a centrally held risk
contingency of $600 million is utilised in full. On the basis of the revised capital expenditure
requirements and its assessment of the full potential of phase one of the project (excluding at
this stage the potential for future expansions to 90 mtpa), Anglo American will record an
impairment charge of $4.0 billion at 31 December 2012 on a post-tax basis. Despite the
challenges the Minas-Rio project has faced, Anglo American is targeting first ore on ship
(FOOS) by the end of 2014.
Cynthia Carroll, Chief Executive of Anglo American, said: “We are clearly disappointed that the
diversity of challenges that our Minas-Rio project has faced has contributed to a significant
increase in capital expenditure, leading to the impairment we have recorded. Despite the
difficulties, we continue to be confident of the medium and long term attractiveness and
strategic positioning of Minas-Rio and we remain committed to the project.
“Minas-Rio is a world class iron ore project of rare magnitude and quality and represents one of
the world’s largest undeveloped resources. The published resource has increased more than
fourfold since acquisition to 5.77 billion tonnes and we believe that further resource potential
(1)
exists through our ongoing exploration. The first phase of the project will begin its ramp up at
the end of 2014, with operating costs expected to be highly competitive in the first quartile of
(2)
the FOB cash cost curve, averaging approximately $30/tonne over the life of mine and
generating significant free cashflow.”
Anglo American announced in December 2012 that all three injunctions that had disrupted the
project in 2012, contributing to the delay of FOOS to the end of 2014, had been lifted.
Construction progress is on track with the revised construction schedule announced in July
2012:
• The mine and beneficiation plant are on track – 92% of the earthworks have been
completed at the beneficiation plant, the first of two grinding mills has been installed and
the civil works for the secondary crusher are complete
• At the 525km slurry pipeline, almost 50% of the pipeline has been laid (approximately
247km), with 76% of the land cleared for earthworks and pipe installation to take place
• The filtration plant is on schedule for completion by June 2013
• The port’s two stackers and reclaimer have been erected and the shiploader installation
is under way.
The primary drivers of the capital expenditure increase from the previous estimate in 2011
relate to:
• The delay in FOOS from late 2013 to late 2014
• Scope changes, including those agreed as part of the review process and taking into
consideration additional land access costs and purchases, increased earth and civil
works required following access to various sites along the pipeline and the increased
costs of meeting licence conditions
• Construction inflation costs, including contract adjustments and mining equipment price
increases
• A centrally held risk contingency of $600 million to accommodate a number of potential
factors to achieve the FOOS date of the end of 2014, including the potential for additional
price escalation, productivity acceleration and finalisation of the extent of earth and civil
works required on land that is yet to be accessed.
The delivery of the project on the proposed schedule and to the revised budget is dependent
upon a number of development milestones being achieved over the next twelve months and
other factors, including:
• The schedule for the completion of the transmission line to the beneficiation plant and
the development of the pipeline assumes that a number of residual land access
constraints be resolved by the end of March 2013
• At the mine site, pre-stripping activity needs to begin in April. Prior to that, further work is
required in order to address matters relating to caves in the mine area
• At the beneficiation plant, the tailings dam needs to be completed by the end of May in
order to be filled during the forthcoming rainy season
• Not encountering unexpected interventions, such as injunctions relating to licences.
The project team continues to work towards satisfying the licence conditions and associated
programmes (sustainable development, social and infrastructure commitments) in order to
secure the necessary operating licences in 2014.
(1)
As detailed in the Anglo American 2011 Annual Report
(2)
$30/tonne on a real basis
For further information, please contact:
Media Investors
UK UK
James Wyatt-Tilby Leng Lau
Tel: +44 (0)20 7968 8759 Tel: +44 (0)20 7968 8540
Emily Blyth Caroline Crampton
Tel: +44 (0)20 7968 8481 Tel: +44 (0)20 7968 2192
South Africa
Sarah McNally
Pranill Ramchander Tel: +44 (0)20 7968 8747
Tel: +27 (0)11 638 2592
Notes to editors:
Anglo American is one of the world’s largest mining companies, is headquartered in the UK and
listed on the London and Johannesburg stock exchanges. Anglo American’s portfolio of mining
businesses spans bulk commodities – iron ore and manganese, metallurgical coal and thermal
coal; base metals – copper and nickel; and precious metals and minerals – in which it is a
global leader in both platinum and diamonds. Anglo American is committed to the highest
standards of safety and responsibility across all its businesses and geographies and to making
a sustainable difference in the development of the communities around its operations. The
company’s mining operations, extensive pipeline of growth projects and exploration activities
span southern Africa, South America, Australia, North America, Asia and Europe.
www.angloamerican.com
Sponsor: UBS South Africa (Pty) Ltd
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