Announcing the signing of an agreement with MMX Mineração e Metálicos in Rio de Janeiro yesterday, Anglo CEO Cynthia Carroll said yesterday that Anglo was targeting 11% of global iron-ore sales by 2012, compared with 3% now.
The group said on April 23 that it would acquire 49% of the MMX Minas-Rio iron-ore project for $1,15bn, its second major investment in Brazil in six months, after Anglo’s board in December approved the Barro Alto nickel project at an estimated capital cost of $1,2bn.
Carroll said that by year’s end Anglo expected to have largely completed an overhaul to focus on the metals demanded by China’s expanding economy.
China, the world’s fastest-growing major economy, grew 10,7% last year, its highest rate in 11 years, stoking a five-year rally in commodity prices.
Carroll took over on March 1 as the London-based Anglo American cut gold, paper and steel holdings to compete with companies including Rio Tinto Group.
The plan was to concentrate output on iron ore, copper, nickel, platinum, diamonds, coal, and zinc, she said. Anglo American was spending $7bn on existing mines, and was studying up to $15bn worth of new projects.
Increases for five years in succession had tripled global contract iron-ore prices to a record. “Iron ore is going to be one of our core areas,” she said.
“We hope to be producing about 100-million tons of ore in five years.”
The expansion plan would focus on the MMX Minas-Rio project in Brazil and Kumba Iron Ore in SA. Kumba was expected to be producing 31-million tons a year by year’s end. Anglo American, which owns 65% of Kumba, planned to expand the mine to 45-million tons and then 60-million tons “in the next few years”, Carroll said.
Eike Batista, founder and chief shareholder of MMX, said MMX Minas-Rio would start output in the third quarter of 2009 with capacity of 26,5-million tons a year. MMX and Anglo American planned to more than double output at the MMX Minas-Rio project by adding a second 525km iron-ore pipeline to link the mine in the Brazilian Highland state of Minas Gerais with the Port of Acu in Rio de Janeiro. To pass through the pipeline, the iron ore would be mixed with water to create a slurry, which would then be pumped to its destination.
Batista said construction of the Port of Acu was expected to begin in September.
The Rio de Janeiro government has granted the licence to build the port, which may attract steel mills, manufacturing facilities and a terminal to export ethanol.
“In iron ore, there’s the prospect of a longer-term bull market, and yet another year of higher iron-ore prices,” Deutsche Bank chief metals economist Peter Richardson said in Melbourne. “Copper demand from China is key. In coal, they stand to benefit from Chinese import demand for metallurgical coal as world steel demand continues to grow.”
Carroll said diamonds for industrial use and jewellery, copper and nickel were among the Anglo American products with the best potential. Demand for diamonds might grow as much as 5% a year, and copper demand would “remain strong”, she said.
The price of copper, which reached a record high of $8800 a ton last May, has since declined 7%. Bloomberg
