Anglo American takes $4 billion charge on Minas-RioStaff writer ▼ |
The review included a detailed re-evaluation of all aspects of the outstanding schedule, with a focus on maximising value and mitigating risk, said the company in the statement.
"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," said Cynthia Carroll, chief executive officer of Anglo American.
Capital expenditure for the Minas-Rio project is projected to increase to $8.8 billion if a centrally held risk contingency of $600 million is utilised in full. On the basis of the revised capital expenditure requirements and its assessment of the full potential of phase one of the project, Anglo American will record an impairment charge of $4.0 billion at December 31, 2012 on a post-tax basis. Despite the challenges the Minas-Rio project has faced, the company is targeting first ore on ship (FOOS) by the end of 2014.
"Minas-Rio is a world class iron ore project of rare magnitude and quality and represents one of the world's largest undeveloped resources. The published resource has increased more than fourfold since acquisition to 5.77 billion tonnes and we believe that further resource potential exists(1) through our ongoing exploration. The first phase of the project will begin its ramp up at the end of 2014, with operating costs expected to be highly competitive in the first quartile of the FOB cash cost curve, averaging approximately $30/tonne(2) over the life of mine and generating significant free cash flow," said Ms. Carroll. ■