Anglo to dispose of its entire interest in Brazil iron-ore project
Diversified major Anglo American is now selling the entire Amapá iron-ore operation, in northern Brazil, to Zamin Ferrous.
Anglo CEO Mark Cutifani, who took over the reins of the company from Cynthia Carroll six months ago, is in the process of cutting $3.5-billion in costs by 2016 to increase the return on capital employed to 15% from the current 8%.
He intends cutting $1.3-billion from operations and another $1.3-billion in areas outside the operating business.
Major projects have been hogging 30% of the balance sheet without delivering commensurate returns.
Last week, the LSE- and JSE-listed company decided to withdraw from the Pebble copper/gold/molybdenum project, in Alaska, which is expected to require a year-end write-off of $300-million.
Zamin, which already has three iron-ore assets in Brazil, will pay an initial $136- million for Amapá, and then have five years to outlay another $130-million for 100% of the business, which Anglo acquired after taking up, from Cliffs Natural Resources, the 30% of the iron-ore operation that it did not already own.
Anglo, which also stands to benefit from the insurance claim, plans to use the proceeds to reduce debt.
Mining analyst firm Liberum Capital expects the insurance claim to total not more than $170-million.
Anglo initially bought 70% of Amapá to secure the troubled Minas Rio iron-ore project, which it acquired from Brazilian businessperson Eike Batista, in 2008, for $5.5-billion.
Minas Rio, which has suffered a series of delays and cost overruns, is expected to begin shipping 26.5-million tons of iron-ore a year from the end of 2014.
Cutifani has described the project pipe- line as “constipated”.
He is intent on lifting the company’s current 11% success rate on delivery of operational targets to a success rate of 75%-plus.
A risk scorecard is being introduced to ensure greater project transparency.
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