Anglo American faces new obstructions to Minas Rio

Anglo American PLC (LON:AAL) has halted preliminary work for installation of a power line at its Minas Rio iron ore project in Brazil, following a judge's decision to suspend the installation license for the line.

A spokeswoman for the company quoted by Dow Jones Newswires, said Anglo was notified last Thursday of Minas Gerais state public ministry’s decision to suspend the license issued by the state government's environment agency on March 15.

The diversified miner is not allowed to undertake new works at the site of its largest global investment, such as clearing vegetation, excavating and removing soil for the opening of the mine, until it is deemed safe for an archaeological site within its perimeter, said the prosecution service of Minas Gerais state last week.

Anglo American said it would challenge in court at least one of these setbacks: the public ministry decision that affects the line that will supply power to the project's iron ore concentrator plant.

Strategic project

Bringing the Minas-Rio project into production is key for Anglo, which bought the project for nearly $5,8bn in a two-stage deal that was wrapped up in August 2008, just before the commodities markets went downhill with the start of the financial crisis.

With Minas, the company is trying to get a share in a market dominated by local players, such as billionaire Eike Batista’s MMX Mineracao (MMXM3) & Metalicos SA and Ferrous Resources Ltd.

Anglo has upraised its cost projection at least four times to as much as $5,8 billion in December last year, since it acquired Minas. This is more than double the figure planned when the company agreed to buy those assets in Brazil, the world’s second-largest exporter of iron ore.

The project includes construction of a mine, beneficiation plant, 525km slurry pipeline and port facility.

When completed the facility would process 26.5 Mtpa iron ore pellet feed. About 50% of the mine’s production will be sold to clients in the Middle East and the remaining 25% to Asian customers.