LUCIANO BORGES, Brazil’s former Secretary of Mines and president of US-listed Ardent Mines. The company has gained mineral rights disputed by Anglo American, which faces ongoing permitting obstacles at its Minas-Rio project.

LUCIANO BORGES, Brazil’s former Secretary of Mines and president of US-listed Ardent Mines. The company has gained mineral rights disputed by Anglo American, which faces ongoing permitting obstacles at its Minas-Rio project.

Anglo Out of its Depth in Brazil's Mining Boscage

Issue 19, November 2012

The resignation on Friday of Anglo American’s chief executive Cynthia Carroll was delivered shortly after the possibility of further cost over-runs at its Minas-Rio iron ore project in southern Brazil. Since Anglo American first bought into the project in 2007, capital costs have risen more than fourfold from $1.4bn to $5.8bn, whilst production targets have slipped from 2009 to 2013.

“Anglo American chronically over-engineer their mines,” one mining analyst who declined to be named told Global Mining Observer. “Rather than build a dirt track, they’ll build a road with pavements and street lighting.”

Minas-Rio relies on a 525km pipe to carry slurry from the mine to the purpose-built Port of Acu. The majority of the pipe remains incomplete, whilst the port is controlled by Brazilian businessman Eike Batiste, who sold Minas-Rio to Anglo American for $6.7bn shortly before the collapse of Lehman Brothers.

The ill-timed acquisition saddled shareholders with debt, preventing a dividend in 2009 for the first time since the Second World War.

In a less publicised failure for the company, in northern Brazil’s Carajas district Anglo American was last year outmaneuvered by US-listed Ardent Mines, valued at $3.3m compared to Anglo’s £27bn ($43bn).

Having prospected the Serro do Sereno property Anglo American Brasil found “significant indications” of copper and gold. It applied for and disputed the exploration rights, which passed instead to a local Cooperative of Miners, COOPEMIC, which in turn transferred them to Ardent Mines for $350,000. Ardent’s president Luciano Borges was formerly Brazil’s Secretary of Mines.

At Minas-Rio, Anglo American has similarly grappled with what it terms “legal stoppages” and an “evolving permitting environment”, suggesting a failure of tact in a mining jurisdiction where diplomacy can ease an otherwise bureaucratic process.

The company only narrowly escaped a legal dispute with Chile’s state-owned Codelco this year, over an option dating back to 1978 on the Los Bronces copper mine. Codelco’s chief executive emerged from negotiations with an agreement he said made Chile “$5.4bn richer than it was yesterday.”

“Anglo American chronically over-engineer their mines.”
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