The mine, which is Anglo’s biggest development project, promises to be one of the world’s largest iron ore producers when it finally gets up and running, but has been plagued by cost overruns and red tape. Initially budgeted in 2007 as a $2.6bn investment, Minas Rio is now expected to cost some $8.8bn, three times as much. It is not expected to start production until 2014.
The delays have centred on spiralling infrastructure costs and bureaucracy issues around securing the no fewer than 300 licenses required by Anglo from the Brazilian government. After a bout of legal skirmishing which seems to have died down, only 17 of these are now said to be outstanding. But the infrastructure woes continue, not least the need to gain access to land in order to build a pipeline to transport the ore. And there may be labour shortages to deal with as the 2016 Olympics in Rio approaches.
Anglo’s chief executive Cynthia Carroll said she was ‘disappointed’ by the delays and the consequent write down, but added that Minas Rio remains ‘a world class iron ore resource of rare magnitude and quality’. If that sounds slightly like an epitaph, perhaps it is because she is stepping down in April, following concerted pressure from investors last year over the firm’s languishing share price.
Still, at least her replacement, Mark Cutifiani of AngloGold Ashanti, should be able to get off to a flying start without worrying about more Brazilian skeletons jangling in the closet. Although a $600m contingency has been set aside for any further headaches.
All this comes just a week or so after Rio Tinto announced its own even larger write downs totalling a whopping $14bn. If you needed confirmation that the global boom in the extractive trades is drawing to a close, the beginning of 2013 has provided plenty of it.