Anglo American Plc agreed to a reduced price for its Amapa iron-ore mine in Brazil with buyer Zamin Ferrous Ltd. after the port used by the project was damaged by a landslide in March that killed six people.
Zamin will pay no more than $266 million for all of Amapa after Anglo agreed to buy the 30 percent it doesn’t already own from Cliffs Natural Resources Inc. and include it in the transaction, London-based Anglo said today in a statement. Anglo had agreed in January to sell its 70 percent stake to Zamin for $380 million, two people with direct knowledge said in June.
A landslide struck Port Santana, which Amapa uses for loading iron-ore shipments on the Amazon River, on March 28 before the January deal could be completed. Anglo Chief Executive Officer Mark Cutifani, who replaced Cynthia Carroll in April, is reviewing the company’s operations from Australia to Brazil in pursuit of savings and increased cash flow.
Anglo, whose investments in Brazil since 2007 will have reached about $16 billion by the end of 2014, will assume responsibility for an insurance claim Amapa is making, which has a cap of about $170 million, it said in the statement. Amapa reported a loss before tax of $369 million for 2012 and had gross assets of $404 million as of June 30, Anglo said.
“We have been in negotiation with our good friends of Zamin,” Cutifani told reporters in Belo Horizonte, Brazil, yesterday. “Obviously with the incident we’ve been very sensitive to make sure that we correct the issues, we work with our colleagues and the families of our colleagues that we’ve lost and that we build a recovery plan that will ensure that said process is able to be completed.”
Zamin will make an initial payment of $136 million and pay as much as $130 million over five years, based on movements in the market price for iron ore, according to Anglo, which will use the proceeds to pay debt. Anglo seeks to complete the deal by the end of the year, it said, without disclosing what it paid for Cliffs’ stake.
Anglo advanced 2.1 percent to 1,577.5 pence at the close in London. The FTSE 350 Mining Index was 0.8 percent higher.
Cutifani is targeting an annual cash-flow gain of $1.3 billion and may seek buyers for some of the 15 assets identified for potential divestment, he said July 26. Anglo said Sept. 16 it’s withdrawing from the Pebble copper project in Alaska, leading to a $300 million charge.
The company has also hired Goldman Sachs Group Inc., Morgan Stanley and UBS AG to sell as much as 49.9 percent of its Minas-Rio iron-ore project in Brazil, the two people said in June. The plan follows a $4 billion writedown of the $8.8 billion mine, processing plant, pipeline and terminal. First shipments are due to begin late in 2014 after years of delays and rising costs.