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TABLE OF CONTENTS Jan 14 - 20, 2013 Volume 98 Number 48 - 0 comments

Anglo American, Cliffs exit Amapa

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2013-01-09

Miners shed more non-core assets in the new year to help free-up capital, with Anglo American (AAL-L, AAUKY-Q) and Cliffs Natural Resources (CLF-N) selling their stakes in the Amapa iron ore operation in northern Brazil.

Anglo American is selling 70% of the operation for an undisclosed price to Zamin Ferrous, a private company founded seven years ago by former commodities trader Pramod Agarwal.

Zamin’s first major investment was a 50% stake in the Bamin iron ore project in Bahia, Brazil, which it sold in 2010 for US$735 million to joint-venture partner ENRC, a financial company based in Kazakhstan. Zamin owns three projects in Brazil — Greystone, Zamapa and Susa — and the Valentines project in Uruguay.

Anglo American says it never considered Amapa a long-term asset, but after acquiring the operation after buying the Minas Rio project from Brazilian tycoon Eike Batista in 2008, production rose from 1.2 million tonnes to 4.8 million tonnes in 2011.

Cliffs, which owns the remaining 30% stake in Amapa, reported an 8-K filing to the U.S. Securities and Exchange Commission in late 2012 that its board had approved the sale, and that the company would record a pre-tax, non-cash impairment charge of US$380 million to US$420 million in its financial statements as of Dec. 31. It does not expect that selling its interest in Amapa will result in material future cash expenditures.

Zamin — which has group offices in Sao Paulo, Montevideo and Dubai, and representative offices in London and Zug — says the company aims to become a leading supplier of direct reduction and blast furnace iron-ore pellet fines to the global steel industry.

For its part, Anglo American is increasing its position in the iron ore market with projects in South Africa and Brazil. It notes that future growth would come from its Minas-Rio project in Brazil, and expansion at the Kolomela mine in the Northern Cape. 

The company’s 100%-owned Minas-Rio greenfield project is expected to produce 26.5 million tonnes of iron ore per year in its first phase, and reach full production in 2014. In November it told investors that preliminary conclusions from a cost review suggest that the capex for the project is “unlikely to be less than the US$8-billion upper end of the current range of analysts’ expectations.” Initially, the project was estimated to cost US$5 billion. Licensing challenges have also delayed estimates for “first ore on ship” until the second half of 2014.

Minas-Rio will include open-pit mines and a beneficiation plant in Minas Gerais producing high-grade pellet feed. Once completed, the ore will travel through a 525-km slurry pipeline to the port of Acu. Anglo owns 49% in LLX Minas-Rio, which owns Acu port.



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Photos

Zamin Ferrous founder Pramod Agarwal.
Zamin Ferrous founder Pramod Agarwal.


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