Anglo American Plc (AAL), proposing to spend as much as $100 billion on doubling mine output, met Brazilian President Dilma Rousseff to seek an end to obstacles facing the industry as delays at its largest project worsened.
“These are blockages that we didn’t anticipate,” Chief Executive Officer Cynthia Carroll, who held talks with Rousseff yesterday, told reporters from London. Anglo posted a 46 percent drop in first-half profit and now expects its Minas-Rio iron-ore project to start shipments in the second half of 2014 or later, after targeting the last six months of 2013.
Carroll’s bet on long-term demand for increased production of iron ore, copper, nickel and coal is topped by the Minas-Rio project, which may cost at least $5.8 billion. Brazilian regulatory hurdles are holding back some 40 mining and infrastructure projects valued at more than $200 billion by an average of two years, according to the Anglo CEO.
“We’re not alone in Brazil,” Carroll said today. London- based Anglo had a license it was awarded for a power transmission line suspended in April, she said, citing an example of the barriers to construction.
Vale SA, based in Rio de Janeiro, delayed its $8 billion Serra Sul expansion in the country and at least three other projects in Brazil last year amid permitting issues, higher costs and labor shortages.
Anglo fell 3.6 percent to 1,894 pence by the close in London, the lowest since October 2009, after news of the delay and as earnings missed estimates. The benchmark FTSE 350 Mining Index rose 0.9 percent.
“The market likely expected some disappointment on Minas Rio, but an additional 12-month delay is likely more than what the market was expecting,” Nomura International said.
First-half earnings excluding one-time items dropped to $1.69 billion, or $1.38 a share, Anglo said today in a statement. That compares with the $1.57-a-share median estimate of 11 analysts surveyed by Bloomberg. Anglo will pay a dividend of 32 cents a share, matching the median estimate.
“This is a negative set of results that reflects the difficulty of the macro environment due to the low cyclical growth,” Goldman Sachs Group Inc. analysts said in a note. The dividend is “small comfort for investors,” SBG Securities (Pty) Ltd. said.
The London Metals Exchange Index (LMEX) of six primary metals lost 12 percent in the past three months as Europe’s debt crisis dims the outlook for global growth. There is a risk of new projects being delayed, BMO Capital Markets said July 11.
Anglo cut its 2012 capital investment target 21 percent to $5.5 billion as it pulled back spending on platinum. Anglo American Platinum Ltd. (AMS), the world’s largest producer of the metal, slumped to a loss after prices fell. Anglo is reviewing the platinum business, whose CEO Neville Nicolau quit last week. Carroll said Anglo intends to retain the platinum operation.
While short-term platinum demand looks subdued, the market should re-balance, Carroll said.
“Long term prices for Anglo American’s products are expected to be supported by widespread supply constraints and the challenges producers face in bringing new supply into production,” Carroll said.
The Anglo CEO agreed earlier this week to buy a controlling stake in the Revuboe coking-coal project in Mozambique from the estate of deceased Australian mining entrepreneur Ken Talbot for A$540 million ($564 million), and boosted its stake in Kumba Iron Ore Ltd. (KIO) to 69.7 percent for $948 million a week ago. She is also increasing Anglo’s 45 percent stake in diamond producer De Beers to as much as 85 percent for $5.1 billion.
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