SANTIAGO (Reuters) – Two leaks in a month, a 90-day outage and $58 million in fines is not enough to temper Anglo American’s (AAL.L) ambition for its long-delayed, multi-billion dollar Minas-Rio iron ore mine in Brazil.
Purchased at the height of the commodities boom a decade ago for $5.5 billion, Anglo American was once counting on Minas-Rio to produce 26.5 million tons of iron ore by 2016. The mine’s strength is its high-grade iron ore that commands a premium as the world’s biggest commodity consumer China seeks to cut pollution.
Minas-Rio is Anglo American’s biggest development project, and its bet on the future of iron ore, but so far it only accounts for a small percentage of its overall profits as it is still in ramp-up phase.
The project has been delayed by Brazil’s labyrinthine permitting process, and production is now hampered by the leaks on the pipeline, which will be shut during a three month inspection. Renewed focus on environmental standards at mines, after leaks at the Norwegian-owned Alunorte refinery and from Anglo’s pipelines, has clouded its prospects in some investors eyes.
Brazil’s federal environmental regulator Ibama levied fines against Anglo American of 71 million reais ($21.1 million) related to two spills last month from a pipeline that carries iron ore from the Minas-Rio mine. That was in addition to 125.6 million reais ($37.3 million) from the Brazilian state of Minas Gerais on April 4.