Diamond & Jewelry News

Anglo American (LON:AAL) won’t resume production at its massive Minas Rio in Brazil until the fourth quarter of 2018 due to two pipeline leaks that forced it to halt operations in March, and which will cause the miner an annual group earnings (EBITDA) loss of $300 to $400 million.

The announcement is the last of a string of difficulties Anglo has faced with the mine, which was expected to produce 16 million tonnes of iron ore this year, but that will now generate just 3 million tonnes.

The delayed restart of Minas Rio comes at a time when several iron ore producers have issued downward revisions to production guidance, tightening the market.

The operation is Anglo American’s biggest development project, and its bet on the future of iron ore, but so far it only accounts for a small percentage of its overall profits as it is still in ramp-up phase, which has taken longer than expected.

Minas Rio has suffered repeated delays and is on hold pending an investigation into two leaks in a month in the more than 500-km pipeline that helps to deliver its iron ore to export markets, which has already cost Anglo $58 million in fines.

Anglo’s series of unfortunate events

The world's number four diversified miner bought the iron ore project in Southeaster Brazil during the commodity prices boom of 2007-2008, paying local ex-billionaire Eike Batista $5.5 billion for it. It had to then spent another $8.4 billion, more than twice what was originally projected, to bring Minas Rio to production in 2014.

The deal soon soured as rising global iron ore output overwhelmed demand, causing prices to tumble 80% from their 2011 peak. The miner also saw itself forced to write down...

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