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Anglo considers writing down value of Minas Rio mine

CEO Cutifani has worked to deliver Minas Rio in time to help achieve his goal. His hopes are fading amid price declines.

Anglo American Plc, which is reviewing operations from Australia to Chile to boost profit, is considering writing down the value of its iron ore and coking coal assets including its flagship Minas Rio project.

“I expect some impairment in the areas of Minas Rio and metallurgical coal,” Chief Financial Officer Rene Medori said at the company’s investor day in London yesterday. “As part of the year-end process, we will go through a review of the carrying value and potential impairment. All assets are in fact performing better than last year, but we are also adjusting implications in terms of prices, especially in iron ore and metallurgical coal.”

The start of shipments from Minas Rio on Oct. 25 coincided with a slump in iron-ore prices as Australian and Brazilian producers expanded capacity and amid slowing demand from China, the biggest user. Minas Rio seeks to raise production to 26.5 million metric tons a year over the next 18 to 20 months at an operating cost of $33 to $35 per wet metric ton.

Anglo delivered the mine $400 million below the revised budget of $8.8 billion, it said in a statement.

The company wrote down the value of the mine by $4 billion and increased its cost estimate for a sixth time in January last year after previous Chief Executive Officer Cynthia Carroll quit amid cost overruns and delays to the operation. Anglo in 2008 estimated it would cost $2.6 billion.

CEO Mark Cutifani, who set a target to increase the company’s return on capital to at least 15 percent by 2016, has worked to deliver Minas Rio in time to help achieve his goal. His hopes are fading amid price declines.

Anglo is seeking buyers for four labor-intensive platinum mines in South Africa and three copper mines and a smelter in Chile. Anglo also wants to sell stakes or exit thermal coal assets that supply domestic markets in South Africa and Australia, Cutifani said over the phone.

Anglo, which yesterday cut its capital-expenditure forecast by $500 million to $800 million for this year and $800 million to $1 billion next year, targets productivity improvements of about 80 percent from 35 percent fewer workers through growth and restructuring.

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