Anglo American takes $4 billion hit on Minas-Rio
January 29, 2013 6:42 PM EST
The company said on Thursday that it expects capital expenditure for the project to increase to $8.8 billion.
"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," outgoing Chief Executive Cynthia Carroll said.
"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, a leading iron ore project in Brazil, is one of Anglo's most significant capital allocation failures of recent years and was largely responsible for Carroll's fall from grace. Anglo bought its first stake in Minas-Rio in 2007, taking control in 2008 with a $5.5 billion deal with Brazilian billionaire Eike Batista's MMX - right at its peak.
The project was intended to help to diversify a company that was still dependent on South Africa for the bulk of its revenue, but has instead been a bruising top-of-the-market deal.
Anglo spent $4.8 billion buying Minas Rio - excluding the value of the Amapa mine, bought as part of the original deal but which Anglo has agreed to sell. It has spent $5 billion on developing it so far and said last year that total development costs could exceed $8 billion - more than three times original estimates.
Development costs in Brazil have been driven higher by issues such as the Olympics and the soccer World Cup, which have increased demand for labour.
Anglo is not the only company to have met with permitting hiccups in Brazil, with even Vale, the world's largest iron ore producer, being hit and ENRC's project there.
The company said it is still targeting first ore on ship by the end of 2014 despite the challenges facing Minas-Rio.
(Reporting by Brenda Goh; Editing by David Goodman)
Most Popular Slideshows
- Typhoon Rammasun Claims 18 Lives in China, Incurs $4.32B Losses (PHOTOS)
- Ellen DeGeneres Caught Cheating with Mutual Friend Before Portia de Rossi’s Rehab – Reports [PHOTOS]
- Kate Middleton's Pregnancy Hearsays: Possible Evidence Revealed [PHOTOS]
- National Ice Cream Day: Most-Ordered Flavors and Toppings by Americans [See Photos]
Join the Conversation
- Fresh Leak Hints iPhone 6 Price and Release Date; 4.7-Inches iPhone 6 Sapphire Display Scratched in Test; New Spigen Cases Out
- iPhone 6 2014 Release Date Very Soon as Apple Orders 120M New iPhones from Foxconn – Report
- Google Nexus 6 on Release Date Will Sport 2K Display Panel & Lower Price Tag – Report
- Motorola Moto G Vs. Xiaomi Mi3 – Low in Price, High -level Features
- FCC Approves Sony Xperia Z3 for U.S. Market
- Killer Xiaomi Mi4 at $369 Likely to Come With 5.0-Inch Display, Snapdragon 801 Processor, 3GB RAM and More
- End of Times Indicators: Japan’s Mount Fuji in ‘Critical State’ to Erupt, Could Affect At Least 1.2M People