By Alex MacDonald
LONDON--Anglo American PLC (AAL.LN) said Tuesday it will sell
the entire Amapa iron ore operation in northern Brazil to Zamin
Ferrous Ltd. for up to $266 million in cash, as part of a deal
revised to reflect a tragic accident earlier this year that killed
six people and damaged port infrastructure.
Anglo American initially planned to sell its 70% stake in Amapa
to Zamin in January for an undisclosed sum, but the sudden collapse
of a section of the Amazon riverbank in March due to heavy rainfall
led the miner to revisit the terms of the deal.
In light of the accident, the FTSE-100 miner entered talks with
its Amapa partner Cliff Natural Resources (CLF) to buy Cliff's 30%
stake in the operation and then amended its agreement with Zamin to
sell 100% of Amapa to Zamin.
Anglo American said it will now sell Amapa to Zamin for an
initial $136 million, subject to certain conditions. Zamin will
then make another payment to Anglo American over a five-year period
that could amount to $130 million, based on a calculation tied to
the market price for iron ore. Anglo American plans to use the
proceeds to pay down debt.
As part of the transaction, Anglo American will assume
responsibility for the risk and rewards of the insurance claim in
relation to the accident. The claim is worth as much as $170
million, according to Liberum Capital.
The deal is forecast to close by the end of the year, subject to
Amapa state regulatory approval.
Anglo American purchased the Amapa mine as part of the Minas-Rio
package of Brazilian iron ore assets from Brazilian businessman
Eike Batista in 2008 for $5.5 billion. Since then Anglo American
has increased Amapa's annual production from 1.2 million tons to
6.1 million in 2012, even though it considered the asset to be
'non-core.' Anglo American began to explore the possibility of
selling its stake in the operation in 2012.
According to investment bank SP Angel, the Amapa asset was
valued at $1.9 billion in 2008 and Anglo took an impairment charge
of $1.5 billion on its holding in 2009, citing operational
difficulties and delays in ramping up production.
For London-based Zamin, the new acquisition should bring
synergies with the company's existing Amapa iron ore processing
facility in Amapa state. Zamin already has three iron ore assets in
Brazil with potential combined resources of 1.5 billion tons, the
company said in a statement.
Write to Alex MacDonald at alex.macdonald@wsj.com
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