Anglo signs $15bn deal for Minas Rio

Anglo American signed a $15bn iron-ore supply agreement with Bahrain Steel for its Minas Rio ironore mine in Brazil.

Anglo American signed a $15bn iron ore supply agreement with Bahrain Steel for its Minas Rio iron ore mine in Brazil.

Minas Rio is arguably the most controversial asset within Anglo, having cost more than $13bn to buy and build but has yet to come close to its design capacity, with further concerns around whether the mine will secure tailings dump permits, which, if not granted, will lead to a halt in production.

The existing dam’s licence expires at the end of 2019 and Anglo CEO Mark Cutifani has stressed at both the full-year results presentation and this week’s AGM that the company is working closely with the Brazilian authorities to put in place a new permit.

The 20-year agreement with Bahrain Steel signed with Anglo American Marketing on Thursday gives the mine a large and important client, taking 8-million tons a year at an approximate cost of $15bn.

“Deliveries under the contract have already started, sourced exclusively from Anglo American’s Minas Rio mine in Brazil,” Bahrain Steel said in a statement on Thursday.

Bahrain Steel said its iron ore pelletising operations at Hidd in Bahrain needs 12-million tons of iron ore a year and the Anglo deal is important in its “strategy to maintain full production capacity and the uninterrupted delivery of high-quality iron ore pellets to steel producers it supplies around the world”.

The transaction is equally as important for Anglo, said Peter Whitcutt, CEO of Anglo American Marketing, noting it would allow the company to extend its presence in the Middle East and North African markets.

Those markets are expected to have 46-million tons of iron ore pellets by 2027, according to a McKinsey report.

The fine iron ore that is pumped 530km from the mine to the Brazilian east coast is ideal for making pellets. It has an iron content of 67%.