Anglo American in a $4bn writedown of troubled Brazil mine
Tuesday 29 January 2013
Anglo American has written down the value of its troublesome Minas-Rio project in Brazil by $4bn (£2.5bn) after delays and rising labour costs.
The company said the expense of running the iron-ore mine it bought at the top of the market five years ago is now expected to reach $8.8bn.
The writedown came as no shock to investors and analysts, who said the project had been a "constant disappointment" since it was acquired from Brazilian billionaire Eike Batista for $5.5bn in 2008.
Minas-Rio has been described as Cynthia Carroll's greatest gamble during her time as chief executive of the company.
The 56-year-old, once dubbed Cyanide Cynthia for her role in an environmentally controversial dam project in Alaska, is leaving the company in April after shareholders demanded a change of leadership.
"We are clearly disappointed that the diversity of challenges that our Minas-Rio project has faced has contributed to a significant increase in capital expenditure, leading to the impairment we have recorded," she said. "Despite the difficulties, we continue to be confident of the medium and long-term attractiveness and strategic positioning of Minas-Rio and we remain committed to the project."
Labour costs in Brazil have been driven higher by events such as next year's football World Cup and the Olympics in 2016.
The mine is likely to be one of the biggest challenges facing Anglo's incoming chief executive Mark Cutifani, when he joins from AngloGold Ashanti.
"The Minas-Rio impairments give the incoming CEO a clean slate, creating a degree of positive sentiment," Bernstein analyst Paul Gait said.
"The greater detail and clarity on the progress of Minas-Rio can only increase the confidence around the executability and delivery of the project."
Shares in the company closed up 57p at 1,929.5p.
News of Anglo's writedown comes less than two weeks since Rio Tinto ousted its chief executive, Tom Albanese, after $14bn of impairments tied to operations in Mozambique and Canada.
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