Anglo American: Minas-Rio expansion still on

Wednesday, April 11, 2018

On March 12, the slurry pipeline that runs from the beneficiation plant at Anglo American's flagship Minas-Rio complex in Brazil's Minas Gerais state to Rio de Janeiro's Açu port ruptured, causing an iron ore pulp spill. The next day, the London-based resources group decided to halt output at Minas-Rio.

About two weeks later, Anglo was gradually resuming operations after authorization from environmental watchdog Ibama when a second pipeline rupture took place.

The second incident made the company decide to halt operations at the complex for at least 30 days while it carries out tests to guarantee the pipeline's safety. The two incidents resulted in fines totaling US$58.5mn.

Unfortunately, the ruptures occurred just after Anglo successfully arranged a long-awaited expansion license to go ahead with phase 3 of Minas-Rio. With the license, Anglo gained access to the full range of run-of-mine grades to reach nameplate capacity of 26.5Mt/y and now seeks to invest US$330mn in the third phase.

The resources group has invested US$15bn over the last few years in the project, the largest mining investment in the world during the period.

BNamericas spoke with Anglo's head of corporate affairs in Brazil, Ivan Simões, about the project's current challenging situation, the impact on exports, investments and the outlook for the mine.

BNamericas: Could you give us a current overview of the Minas-Rio complex after the second ore leak? What is the outlook for a return to operations?

Simões: The Minas-Rio operations are paralyzed. Only the necessary teams are maintained for routine maintenance and monitoring to ensure the integrity of the structures and the safety of people.

At present, the focus of the company is environmental recovery work, investigation of the causes of the incidents and safety inspections. A thorough inspection process will be carried out on all 529km of the pipeline, with the aim of ensuring the integrity of the facilities and the safety of all.

This verification will be done by an instrumented pipeline inspection gauge [IPIG], which runs internally throughout the pipeline and makes a complete scan of several aspects that make up the tubes, generating a large amount of information, which will be analyzed by independent companies.

We estimate the entire process will take about 90 days. We will only be able to operate again after understanding the causes of the two incidents, repairing the problems and checking the integrity of the entire pipeline.

BNamericas: To what extent did the first incident impact Anglo's iron exports? Does the second event already have an expected impact?

Simões: At the time of the first rupture, which occurred on March 12, we still had inventories at the port, so we were able to meet our March shipments. With the second occurrence, on March 29, we no longer had stocks and started the process of renegotiating with customers. The financial impacts of the shutdown have not yet been estimated.

BNamericas: Does the company intend to take any legal action against the manufacturer of the ruptured pipeline?

Simões: The ruptures' causes are still being investigated, with analyses being conducted by the technological research institute [IPT] and the federal university of Minas Gerais [UFMG]. Thus, it is premature to talk about measures to be taken.

BNamericas: Just before the leaks, Anglo obtained the licenses needed for implementing Minas-Rio's phase 3 expansion. How was the expansion going?

Simões: We managed to get the preliminary and installation permits for Minas-Rio phase 3 on January 26 of this year, which allowed us to start works for access to new areas of the mine and dam improvements. These activities will continue to be implemented, as will the fulfillment of the permit's conditions. In the long term, Minas-Rio will continue to produce quality and competitive iron ore.

BNamericas: Can the two pipeline incidents impact the planned US$330mn investment that the company had previously announced for Minas-Rio's expansion?

Simões: The planned investments are maintained at the moment.

An open-pit mine at Anglo's Minas-Rio iron ore complex in Brazil. (SOURCE: Anglo American)


About the company

Anglo American Brasil, a subsidiary of Anglo American plc, is engaged in the mining of iron ore, nickel and niobium, and in the production of phosphate fertilizers. The company's main iron ore assets are Minas-Rio, one of the world's largest mining complexes, and Ferroport, formerly known as LLX Minas-Rio, which operates the Açu port complex. In nickel mining, the company has the Barro Alto and Codemin operations in Brazil. Anglo American Brasil is headquartered in Belo Horizonte.