Name and Location
Minas-Rio iron-ore project, Minas Gerais, Brazil.

Client
Anglo American Brazil (Anglo Brazil).

Project Description
The Minas-Rio iron-ore operation has resources of about 5.77-billion tons and further resource potential exists.

The project comprises three assets – Serro, Itapa and Serra do Sapo (largest orebody) – and will involve the construction of a 525 km 26-inch-diameter slurry pipeline, which, when complete, will be the longest and the largest-tonnage iron concentrate pipeline in the world.

Minas-Rio includes the development of a mine at Conceição do Mato Dentro and the construction of a beneficiation plant at Alvorada de Minas.

The beneficiation plant will convert the iron-ore into high-grade pellet feed. The pellet feed will be mixed with water to form a slurry, which will be pumped along the slurry pipeline to the coast at Açu, near São José de Barra, in Rio de Janeiro state.

There the pellets will be dried before being loaded onto ships.

Value
The cost of building the mine is expected to increase from $5.8-billion to at least $8.8-billion, if a centrally held risk contingency of $600-million is used in full.

Duration
In Anglo American’s half-year financial report in July 2012, it reported that, subject to resolving the existing licence challenges facing the Minas-Rio project by the end of 2012 and additional unexpected interventions not being encountered, first ore on ship was expected to be delayed to the second half of 2014.

Latest Developments
Anglo American has completed the detailed cost and schedule review of its Minas-Rio project announced in November 2012.

The review included third-party input and examined the outstanding capital expenditure (capex) requirements in light of current development progress and the disruptive challenges faced by the project. The review included a detailed re-evaluation of all aspects of the outstanding schedule, with a focus on maximising value and mitigating risk.

Following its November 2012 guidance and the completion of the review, capex for the project is expected to increase to $8.8-billion.

The primary drivers of the capex increase from the previous estimate in 2011 relate to:
• The delay in first ore on ship from late 2013 to late 2014;
• Scope changes, including those agreed on as part of the review process and taking into consideration additional land access costs and purchases, increased earth and civil works required for access to various sites along the pipeline, as well as the increased costs of meeting licence conditions;
• Construction inflation costs, including contract adjustments and mining equipment price increases; and
• A centrally held risk contingency of $600-million to accommodate several potential factors to achieve the first ore-on-ship date by the end of 2014, including the potential for additional price escalation, productivity acceleration and the finalisation of the extent of earth and civil works required on land that is yet to be accessed.

Despite the challenges the Minas-Rio project has faced, Anglo American is targeting first ore on ship by the end of 2014.

Construction progress is on track according to the revised construction schedule announced in July 2012.

The mine and beneficiation plant are on track – 92% of the earthworks completed at the beneficiation plant, the first of two grinding mills has been installed and the civil works for the secondary crusher are complete.

About 247 km of the 525 km slurry pipeline has been laid, with 76% of the land cleared for earthworks and pipe installation.

The filtration plant is on schedule for completion by June 2013.

The port’s two stackers and reclaimer have been erected and the shiploader installation is under way.

Key Contracts and Suppliers
Ausenco (conceptual design; feasibility study; basic, advanced and detailed engineering; supervision for earthmoving; detailed design; procurement support; and construction supervision); Construçoes e Comercio Camargo Correa (slurry pipeline); and Turner & Townsend (Phase 1 – capital and project schedule review, ongoing contracts administration and cost control. Phase 2 – preparation of the Fédération Internationale des Ingénieurs Conseils document for professional services and the negotiation and settlement, in conjunction with Anglo American, of the professional services contract).

On Budget and on Time?
The project has been delayed several times, owing to a combination of market and environmental factors.
Despite these challenges, Anglo American is targeting first ore on ship by the end of 2014.

The cost of the project is expected to increase to $8.8-billion.

However, the delivery of the project on schedule and within the revised budget depends on several development milestones being achieved over the next 12 months and other factors, including:
• that several of residual land access constraints for the completion of the transmission line to the beneficiation plant and the development of the pipeline are resolved by the end of March 2013;
• that prestripping activity at the mine site begins in April and, prior to that, further work be done to deal with matters relating to caves in the mine area;
• that the tailings dam at the beneficiation plant is completed by the end of May, so that it can be filled during the forthcoming rainy season; and
• that no unexpected interventions are encountered, such as injunctions relating to licences.

Contact Details for Project Information
Anglo Brazil, tel +55 21 3031 3434; or Anglo American investor relations, Leng Lau, tel +44 20 7968 8540.
Ausenco, tel +1 925 939 4420 or fax +1 925 937 8875.
Construçoes e Comercio Camargo Correa, tel +55 11 384 5511.