[miningmx.com] — GLOBAL miner Anglo American is considering selling its majority stake in the Amapa iron ore operation in northern Brazil as it focuses on its flagship Minas-Rio growth project further south, several industry sources said.
Anglo bought control of the Amapa operation, which produces both pellet and sinter feed, in 2008, as part of the $5.5bn Minas-Rio acquisition from Brazilian billionaire Eike Batista’s MMX.
An internal valuation has put the Amapa operation’s value at up to $1.5bn, meaning Anglo’s 70% holding would be worth at least $1bn, according to one of the industry sources with direct knowledge of the matter.
“It is a small mine, it is not the best asset in the world. It is in the Amazon and the logistics are difficult … They would rather focus on Minas-Rio,” a second industry source said.
Another source familiar with the situation said the mine was not scaleable and pointed to restrictions on Capesize vessels in the Amazon port serving Amapa, limiting the amount of ore that can be shipped at any one time and increasing freight costs.
Anglo American declined to comment on Monday.
Commercial production began in January 2010 and Amapa is expected to produce 4.5 million tonnes in 2011, according to Anglo American’s annual report – a fraction of Minas Rio’s expected production of 26.5 million tonnes per year. Amapa became profitable at the end of 2010, ahead of schedule.
“It doesn’t fit particularly well and it is never going to be a tier one asset,” a third source said, but added the mine was turning a profit and its size could make it affordable to strategic buyers even in the current climate.
The first source said there had already been interest from an unnamed Brazilian party and from an Indian iron ore producer, which the source was also unable to name.
Anglo’s minority partner in Amapa is US miner Cliffs Natural Resources, which the source said could also be a buyer.
Minas-Rio, bought in 2008 before the financial crisis, has been one of Anglo’s more controversial acquisitions. Anglo has been criticised for overpaying and the Minas-Rio project, which will include open pit mines and a processing plant producing pellet feed, has seen cost overruns and delays.
It is currently scheduled to come into full production in the second half of 2013.
Anglo American replaced the head of its Brazilian iron ore operations, which includes both Amapa and Minas Rio, earlier this month.
