Global mining major Anglo American is pondering selling part of its $3,5-billion Minas-Rio iron-ore project, in Brazil, in order to fund future expansions of the operation.

This has been revealed to Bloomberg News by London-based Anglo American spokesperson James Wyatt-Tilby. And Anglo American CEO Cynthia Carroll has told The Australian newspaper that “iron-ore demand out of China for us, in particular, is at record levels – they can’t get enough”.

A day previously, she had told the Brisbane Mining Club that the “long-term fundamentals for the mining industry remain very robust from both the demand and the supply sides”.

Minas-Rio, which Anglo American bought from Brazilian iron-ore miner MMX, is so named because the iron-ore will be mined in Minas Gerais state and 
exported from Rio de Janeiro state. Along with another iron-ore mining operation in Brazil, in the state of Amapá, also bought from MMX, it forms Anglo Ferrous Brazil. (Anglo Ferrous Brazil owns 69,2% of the Amapá operation and 99,4% of the Minas-Rio project). The deal which created Anglo Ferrous Brazil was cut last year and cost Anglo American $5,5-billion.

Minas-Rio is expected to start production in the second quarter of 2012. This first phase of the project will have an annual production capacity of 26,5-million tons. Anglo Ferrous Brazil president Stephan Weber has already stated that the company intends to increase this to some 80-million tons by 2015.

The company is seeking to penetrate the Chinese market, targeting what Weber calls “second and third level” companies, that is, the smaller Chinese steelworks. “They will only order a ship every three months, but the advantage is that there are many of those small companies in China and we can sign long-term contracts. The long-term market is our 
target – we do not want to play in the spot [market] – the benchmark [price] is the road which Anglo American chooses.”

The expansion of Minas-Rio will take place in two phases, each adding another 26,5-million tons of production capacity. “We will look at the possibility of introducing an investor into the project as we develop our plans for phase two and three. There’s no date set yet for these phases,” said Wyatt-Tilby.

Almost inevitably, press speculation focused on the possibility of Chinese investment in Minas-Rio. The Australian highlighted that Chinese companies had
approached Anglo American about buying part of the project. The paper quoted Carroll as saying: “We have been approached by quite a number of possible partners very keen to get in with us.” She added that Chinese companies were among these possible partners. It should be noted, however, that this implies that there is also a significant number of non-Chinese potential investors for Minas-Rio. (Separately, Wyatt-Tilby refused to confirm whether any talks were taking place with Chinese groups.)

Carroll cautioned that her group wanted to do further work on its development plans and capital investment requirements for Minas-Rio before choosing a partner. At a production rate of 80-million tons a year, Minas-Rio’s output would be equivalent to slightly less than 75% of the current capacity of BHP Billiton’s Pilbara iron-ore complex, in Australia.

Originally, Anglo American had hoped that Minas-Rio would start production next year, but this had to be pushed back to 2011, owing to the time taken to 
obtain the necessary environmental licence. The iron-ore from the Minas mines will be conveyed to a new export terminal on the Rio coast in the form of slurry along a 525-km pipeline. 
The pipeline will cross two states, 32 municipalities, and the properties of 1 200 landowners. Negotiations with these landowners are taking longer than originally anticipated, and causing further delays.

Anglo American also owns South African iron-ore-miner Kumba, with a 63,4% share.

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