Anglo hit by 4.0bn-dollar impairment for Brazilian iron-ore project

Diversified mining group Anglo American said on Tuesday that it will recognise a four billion-dollar impairment charge in its 2012 results after completing a detailed cost and schedule review of its Minas-Rio iron ore project in Brazil.

Diversified mining group Anglo American said on Tuesday that it will recognise a four billion-dollar impairment charge in its 2012 results after completing a detailed cost and schedule review of its Minas-Rio iron ore project in Brazil.

The review, first announced in November, was taken after the company said last year that first ore on ship (FOOS) would be delayed to the second half of 2014 due to "licensing challenges".

At the time, Anglo had estimated capital expenditure for the project to be at least $8.0bn. Now, the company has revealed that capex for Minas-Rio will likely be $8.8bn, if a central held risk contingency of $600m is used.

The increase reflects the delays in FOOS, so-called "scope changes", construction inflation costs.

These revised capital expenditure requirements and the assessment of the full potential of phase one of the project mean that Anglo American will record an impairment charge of $4.0bn on a post-tax basis for 2012.

The company said that it should expect FOOS by the end of 2014, later than its initial estimate of late 2013.

"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," said Chief Executive Cynthia Carroll.

"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."

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