Anglo American Iron Ore Business Being Drilled on Two Fronts

PUBLISHED: Nov 13 2012 @ 08:43 | Comments (4) | More info about Kenneth G. Mondero

Shares of global diversified miner Anglo American plc (LSE:AAL) were being drilled on two accounts today, as its iron ore business on both sides of the Atlantic, the costly Minas – Rio Project in Brazil and the strike-hit Kumba Iron Ore in South Africa, suffered setbacks that are anticipated to hurt the company’s 2012 financial year.

In a statement, the London – based firm said total capital expenditure for the Minas – Rio project will be at least US$8 billion, aligning with the high-end forecast by analysts but the final price could go up as the company continues to review the impact of the delays of its maiden ore shipment.

The 100% owned Minas – Rio project is set to produce 26.5 million tonnes per annum of wet iron ore pellet feed during the first phase of its development with a potential to double production in the second phase but construction has been stalled by legal constraints filed to local authorities.

According to Anglo American, two injunctions have already been resolved and the company is only left with one more challenge – the issue around the construction of electricity transmission lines.

“Efforts to resolve the issue continue with the regulatory and governmental authorities,” Anglo American stated.

Meanwhile, legal impediments will likely push the already delayed shipment of the first produce from one of the world’s biggest iron ore resource further than the latest 2014 schedule.

On the other side of the globe, Anglo American’s 65.2%-owned Kumba Iron Ore in South Africa expects headline earnings and basic earnings by the end of the year to be 20% less than what it had in 2011.

Last year’s headline earnings per share and basic earnings per share were at SAR53.13 and SAR53.11, respectively about £3.80 for both figures.

Kumba’s operations in the recent weeks were affected by labour action from a number of its employees that cost the company 2.5 million tonnes of finished products from its Sishen mines – an offshoot of the greater industrial action in South Africa’s mining industry.

Meanwhile, back in London, share price lost 60 pence, or 3.3%, to £17.67 by 12:20 PM GMT at a volume of over 3.2 million shares, trading on the London Stock Exchange.

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