Anglo to start building Brazil mine, gets licence

Fri Dec 10, 2010 11:19am GMT

By Eric Onstad

LONDON (Reuters) - Miner Anglo American Plc will start building early next year one of its biggest growth projects, the Minas Rio iron ore operation in Brazil, after getting a key licence from the government.

Initial works on the project, which had been hit by delays and cost increases, will kick off in March, Anglo said in a statement on Friday.

Anglo's London shares gained 1.3 percent to 3034 pence by 1058 GMT, outperforming a 0.5 percent rise in the British mining index.

They have underperformed the mining index by nearly 10 percent so far this year, partly weighed down by worries about Minas Rio, analysts said.

"We see this news as a big positive for Anglo, with the project now underway and significantly de-risked. In particular we see the risk of further capex overruns which have plagued the project as much reduced from here," said Liberum Capital in a note.

The group, the world's fourth-biggest iron ore producer, said in July that costs to build the mine would likely rise by about $750 million from the existing estimate of $3.8 billion.

It did not provide an update on costs on Friday.

Minas Rio, located in Minas Gerais state, will produce 26.5 million tonnes of iron ore pellet feed per year.   Continued...

<p>A mine worker is seen underground in South Deep mine outside Johannesburg June 4,2010. REUTERS/Siphiwe Sibeko</p>
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