Anglo American may increase capacity at its Minas-Rio iron ore mine in Brazil by nearly 10 per cent, a move that could cut unit costs at the troubled $US13 billion project, the company's Brazil chief executive said.
Production volume could rise as high as 29 million tonnes in the 2018-2020 period, 9.4 per cent more than the mine's expected capacity of 26.5 million tonnes a year, Paulo Castellari, Anglo's CEO for Brazil, told reporters at a presentation near Belo Horizonte, Brazil.
Adding new capacity without large additional investments brings down per-tonne costs for bulk commodities. This could help Anglo's Minas-Rio mine compete with low-cost producers such as Brazil's Vale and Australia's BHP Billiton and Rio Tinto, which have cash costs of between $US20 and $US30 per tonne.
Cash costs at Minas-Rio are expected to be between $US33 and $US35 per tonne, Castellari said.
This year, costs are expected to be nearly double that figure at about $US60 per tonne as the recently opened mine ramps up output.
Iron ore's rally from a decade-low offers investors an opportunity to bet against the commodity, according to Goldman Sachs Group.
The Minas-Rio project sends iron ore 525 kilometres from its central highlands mine in Minas Gerais state via a slurry pipeline to a port north of Rio de Janeiro where it is pelletised and loaded onto ships.
Minas-Rio cost $US5.5 billion to acquire the rights from Brazilian tycoon Eike Batista and $US8.4 billion to build. It is the largest-ever foreign investment in Brazil.
After taking a $US4 billion write-down on the project in 2012, Anglo began operations at Minas-Rio late last year, nearly five years behind schedule and after a China-driven iron-ore price boom went bust.
Iron ore prices in the Chinese spot market, the largest for the steel-making ingredient, rose on Monday to the highest in more than two months.
Iron ore, though, is nearly 40 per cent cheaper than a year ago and trades at some of its lowest levels since spot-market pricing became the world benchmark in 2008.
Castellari said Anglo had so far been pleased with the premium the company was receiving for its high-iron-content ore but declined to say how much more he gets per tonne above the benchmark spot price.
Source: Reuters
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