Anglo American plc has written down the value of its Minas-Rio iron-ore project in Brazil by US$4 billion after significant increases in capital expenditure.
To reach phase one capacity of 26.5Mt/y, the project is now slated to cost US$8.8 billion, an US$800 million increase on its November 2012 guidance and more than 300% up on its original estimate of US$2.7 billion.
The project has been hit by huge cost overruns linked to the development of the mine, as well as delays in obtaining licences.
“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,” Anglo’s chief executive (CEO) Cynthia Carroll said.
Anglo said the impairment does not consider any potential value from future expansion to 90Mt/y.
The projected first ore on ship (FOOS) date recently changed from late 2013 to late 2014, and the company has put in place a US$600 million contingency fund to ensure that the new deadline is hit.
Anglo has had a difficult year, with strikes in South Africa hitting platinum production.
In April, Carroll will be replaced as CEO by Mark Cutifani, head of AngloGold Ashanti.