Anglo halts work at iron-ore mine
• Minas Rio operations in Brazil suspended for up to three months for checks to be carried out on troublesome 530km slurry pipeline
Anglo American has suspended its Minas Rio iron-ore mine in Brazil for up to three months to conduct checks on the pipeline that is the sole method for delivering highly abrasive iron-ore slurry to the port 530km away after a spate of leaks.
Anglo American has suspended its Minas Rio iron-ore mine in Brazil for up to three months to conduct checks on the pipeline that is the sole method for delivering highly abrasive iron-ore slurry to the port 530km away after a spate of leaks.
The Minas Rio mine has already cost at least $13bn to buy and build, missing production targets with difficulties in securing permits and permissions, particularly for land servitude for the pipeline.
After a leak which resulted in operations suspended for 15 days in March was followed by another small eight-minute leak near the same place on the pipe, Anglo took the decision to check the entire pipeline for potential faults, a process that will take up to 90 days.
“Minas Rio is working closely with its employees and unions and all the relevant authorities in Brazil, locally and nationally, and Anglo American’s marketing business is engaging with its customers in relation to product delivery schedules,” Anglo said in a brief statement.
Anglo CEO Mark Cutifani has described Minas Rio as an example of how not to buy and build a project, saying there were “many errors”.
“The impact is difficult to judge considering any remedial actions are as yet unknown, which could hamper restart and ramp-up timing, as well as any associate costs,” said RBC analyst Tyler Broda.
RBC had expected Minas Rio to generate earnings before interest, tax, depreciation and amortisation of $224m in 2018 based on forecast production of 16.5-million tonnes of ore.
“At about 1.3-million tonnes per month, this high-grade material is likely to be missed as a source of pellet feed. However, we would not expect a significant impact to the iron ore market at this point. Although a high-quality product, this mine is less than 0.5% of global supply,” Broda said in a note.
The $13bn price tag at Minas Rio contributed to the high debt level in Anglo that Cutifani and his team tackled by selling and closing assets.
Anglo has yet to update the market on whether it has stockpiles at its export facility at the port, which it can supply into contracts, and what the cost would be of the 15-day shutdown followed by the 90-day suspension. The risky nature of a single system to deliver iron ore from the opencast mine 530km away over rugged terrain was highlighted by the closure. Trucking is not an option and there is no railway nearby.
“Specialised technical equipment will now be used to identify any other areas of potential weakness within the pipeline,” Anglo said.
“Due to the length of the pipeline and the priority of ensuring the protection of the natural environment, the current expectation is that it will take approximately 90 days for the full inspection to be completed during which time operations at Minas Rio will remain suspended,” it said.