Anglo American counts cost of delays at Brazil iron ore project

http://www.guardian.co.uk/business/2013/jan/29/anglo-american-brazil-iron-ore-writedown

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Mining giant Anglo American is writing $4bn (£2.5bn) off the value of the troubled Brazilian iron ore project that led chief executive Cynthia Carroll to announce her resignation last year.

The company said delays and cost overruns have driven costs at its Minas-Rio iron ore project up to $8.8bn.

Carroll announced her resignation in October last year, after coming under pressure from investors unhappy with the group's languishing share performance. She will make way for Australian gold mining executive Mark Cutifani at the beginning of April.

On Tuesday, she said: "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. 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."

Carroll signed off on the huge Minas Rio project shortly after joining Anglo in 2007, in a bid to reduce the company's reliance on revenues from South Africa. But it has proved a bruising top-of-the-market deal. The mine and accompanying 325-mile pipeline have been plagued with delays and are thought to be running at least three years late.

Ben Davis at Liberum Captial said: "They were riding this over-optimistic boom, they didn't know what they were letting themselves in for and it's clearly been difficult for them ever since. The blame has to sit with [Carroll] on that one."

Anglo spent $4.8bn buying Minas Rio – excluding the value of the Amapa mine, which was bought as part of the original deal but which Anglo has since agreed to sell. It has spent $5bn on developing it so far and said last year that total development costs could exceed $8bn, more than three times original estimates.

Carroll's successor joins Anglo from South African miner AngloGold, where he was chief executive. He will be only the second non-South African to run Anglo, but sources said it was his South African mining credentials – specifically five years at Johannesburg-based AngloGold – that were critical for Anglo.