London, England — 14 November 2012 – Global mining giant Anglo American says it is undertaking a detailed cost review at its Minas Rio iron ore mine in Brazil, and has acknowledged that total capital will balloon to at least US$8 billion from earlier estimates of US$5.8 billion.
Miningmx reports that this takes total investment in the mine, which has been repeatedly delayed as the UK-listed group fought through a seemingly interminable paper chase, to some US$14 billionn since it was first announced.
Shares in Anglo fell 3.5% with analysts saying that while not a surprise, the increase in capital costs for the project would hit shareholders hard.
Anglo said in a morning announcement that since July it had been attempting to overcome injunctions which would allow the project to proceed, and had received the rubber stamp for construction activities related to a beneficiation plant at the mine and land access for a 525km pipeline route.
A third injunction, related to the building of an electricity transmission line, was still outstanding despite the licence having been awarded in March. Work also continues to complete the land access programme for the pipeline, Anglo said.
It added that construction was on track where there hadn’t been any regulatory delays, but that it was undertaking a detailed cost review.
“This is to assess the impact of the already announced delay and the other disruptive challenges faced by the project, which include high cost inflation across the construction industry in Brazil," Anglo said.
“The current indications are that capital expenditure for the project is unlikely to be less than the US$8 billion upper end of the current range of analysts’ expectations,” Anglo added.
Cynthia Carroll, the departing CEO of Anglo American, said in July that first shipments from the proposed 26.5MtpaMinas Rio project would be delayed until the second half of its 2014 financial year.
Liberum Capital said that “reading between the lines” it was likely the project would not come on stream before 2015.
Source: Miningmx. For more information, click here.