Anglo American to boost Minas Rio mine to full capacity as it gets key licence

Minas Rios is expected to produce 26.5 million tonnes of iron ore a year. (Image courtesy of Anglo American.)

Anglo American (LON:AAL) will boost its giant Minas Rio iron ore mine in Brazil to full capacity after the country’s authorities granted it a key licence for the use of an expanded tailings dam at the site.

Operations at the mine, expected to produce 26.5 million tonnes of the steel-making ingredient a year, were suspended for eight months last year following a leak in a pipeline that carries ore to a port in Rio de Janeiro for export.

The company restarted Minas Rio in December 2018 after repairing the pipeline, but analysts had pointed out that future production would be severely reduced if Anglo was unable to raise the level of the tailings dam.

The permit is the last one Anglo needed to complete a third phase of development that will take the mine to full capacity of 26.5 million tonnes of iron ore per year

The newly obtained licence not only allows Anglo to operate the upgraded mine waste storage, but it completes the third phase of mine development, which will take it to full capacity.

Waste disposal is a sensitive issue after a tailings dam collapsed at a Vale mine in Brazil, killing almost 300 people and destroying the nearby town of Brumadinho. Brazilian authorities have become stricter in granting licences for these facilities since.

Anglo said it had built the Minas Rio dam using the downstream method, which is regarded as safer and can hold more water than the upstream design. 

The world’s number four diversified miner bought the iron ore project in Southeast Brazil during the commodity price boom of 2007-2008, paying local ex-billionaire Eike Batista $5.5 billion for it. Anglo then spent another $8.4 billion, more than twice what was originally projected, to bring Minas Rio into production in 2014.

The deal soon soured, as rising global iron ore output overwhelmed demand, causing prices to tumble 80% from their 2011 peak. The miner also saw itself forced to write down the value of the asset by about $4bn, underscoring how the group mistimed its entry into the iron ore sector.

And while prices recovered in 2016 (they climbed 81%), the extreme volatility for most of the year brought into question whether Anglo’s costly bet for iron ore would or would not eventually pay off.

Despite the challenges, Anglo said that Minas Rio will produce 23 million tonnes of iron ore this year.