Anglo American takes $4.0 bn hit on Brazil mine delay

Anglo American on Tuesday said it was taking a $4.0 billion hit on the value of its Minas-Rio iron-ore mining project in Brazil owing to delays that have sent costs soaring, as the company looks to a new era.

The mining giant, which has been hit in recent months by slumping platinum output on fatal strike action by workers in South Africa, said it would "record an impairment charge of $4.0 billion (3.0 billion euros)" in its 2012 earnings.

"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," chief executive Cynthia Carroll said in a statement.

"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," added Carroll, who recently said she was stepping down from her role in April, amid the company's problems in Brazil and South Africa.

Anglo American on Tuesday said that capital expenditure for the Minas-Rio project could increase to $8.8 billion, citing higher construction costs and delays to the first deliveries of iron ore to late 2014 rather than this year.

The company had purchased the Brazilian project in two instalments in 2007 and 2008 for a total of $4.8 billion to secure key supplies of iron ore -- a metal used to make steel.

Since then, the capital required to develop the project has ballooned more than threefold, while the start date has now been pushed back by five years, with Anglo hit by delays to obtaining permits.

Anglo rivals Rio Tinto, BHP Billiton and Brazil's Vale have also recently been forced to write down the value of assets because of ill-timed acquisitions or poorly executed projects.

"Minas-Rio is a world class iron ore project of rare magnitude and quality and represents one of the world's largest undeveloped resources," Carroll said in Tuesday's statement.

Speaking later to journalists, she said the risks ahead were less acute than the problems that had hindered the project.

But she added: "I think a (future) challenge is land access."

"Another challenge is labour availability given the (summer) Olympics and the (football) World Cup" being held in Brazil in 2016 and 2014 respectively.

The project, which is forecast to produce 26.5 million metric tons of iron ore a year, includes building a 525-kilometre (328-mile) pipeline that would transport a slurry form of the metal to the Brazilian coast.

Despite Tuesday's announcement, Anglo American's share price rallied to show a gain of 2.99 percent at 1,928.50 pence in late afternoon deals on London's benchmark FTSE 100 index, which was up 0.42 percent to 6,320.75 points.

"Anglo American's $4 billion write down on Minas Rio appears in line with expectations," analysts at Investec financial group said in a note to clients.

Tuesday's announcement came only a few days after Anglo American said that its production of platinum had slumped by 29 percent in the fourth quarter of 2012 because of violence at its South African mines.

Meanwhile earlier this month, the miner named AngloGold Ashanti boss Mark Cutifani as its new chief executive to succeed Carroll, who announced in October her intention to step down as head of Anglo American.

Also since the start of the year Anglo American, which is the world's biggest producer of platinum, announced plans to axe 14,000 jobs in a dramatic restructuring of its strike-hit South African operations.

The vast majority of job cuts, 13,000 in all, would be lost around Rustenburg, a city 110 kilometres (69 miles) northwest of Johannesburg that was the crucible of labour unrest that shocked the world last August and September.

Then, mineworkers' demands for higher wages crippled production across South Africa's mining sector and resulted in violence that claimed at least 50 lives amid a police crackdown.

-- Dow Jones Newswires contributed to this report --

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