22 February 2024
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Anglo American secures additional
multi-billion tonne high quality iron ore resource at
Minas-Rio
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Anglo American plc ("Anglo
American") announces that it has agreed to acquire and integrate
the contiguous Serra da Serpentina ("Serpentina") high quality iron
ore resource owned by Vale SA ("Vale") into Anglo American's
Minas-Rio mine in Brazil ("the Transaction"). Anglo American will
continue to control, manage and operate the Minas-Rio operation,
including any future expansions that relate to
Serpentina.
Duncan Wanblad, Chief Executive of Anglo American,
said: "The opportunity to partner
with Vale to secure a high quality iron ore resource of this scale
and quality, right next door to Minas-Rio, is compelling -
particularly given all the physical synergies of our mining and
processing infrastructure to create a single optimised operation,
combined with the option to access Vale's rail and port logistics.
The sheer scale and quality of the Serpentina orebody offers
significant value, including through the scope to expand the
production of the premium grade pellet feed products we sell to
steelmaking customers as they focus on decarbonising their own
processes for decades to come. The Minas-Rio DRI-grade product
sells into one of the most attractive growth segments available in
our industry today."
Serpentina1 contains a
Mineral Resource of 4.3 billion tonnes of iron ore, with a
significantly larger total endowment upside that reflects the total
strike length of the orebody of more than twice that of Minas-Rio.
Serpentina is also of a higher iron ore grade than Minas-Rio's
already high grade ore and contains predominantly softer friable
ore that together are expected to translate into lower unit costs
and capital requirements for its extraction. The combination of the
two resources also offers considerable expansion opportunities,
including the potential to double production, which Anglo American
and Vale will assess under the Transaction's terms.
Eduardo Bartolomeo, CEO of Vale,
commented: "We are pleased to
partner with Anglo American to support the growing demand for high
quality iron ore as our clients accelerate their transition to low
carbon emissions steelmaking. Minas-Rio is a Tier-1 asset that will
benefit from great synergies with Serpentina's deposit and Vale's
logistics and we are confident this partnership will unlock
significant value to all of our stakeholders. We plan on allocating
our share of the high-quality pellet feed to our pellet plants in
Brazil and in the future to the Mega Hubs
producing iron ore briquettes."
Under the Transaction's terms, Vale
will contribute Serpentina and US$157.5 million in cash to acquire
a 15% shareholding in the enlarged Minas-Rio, subject to normal
completion adjustments. If the average benchmark iron ore
price2 remains above US$100/t or below US$80/t for four
years, a purchase price adjustment payment will be made to Anglo
American or Vale, respectively, in line with an agreed
formula.
Following completion of the
Transaction, Vale will receive its pro rata share of Minas-Rio
production. Vale will also have an option to acquire an additional
15% shareholding in the enlarged Minas-Rio for cash if and when
certain events relating to a future expansion of Minas-Rio occur,
including the receipt of the requisite environmental
licence3 for an expansion following the completion of a
pre-feasibility study (PFS) and feasibility study (FS)4,
at fair value calculated at the time of exercise of the
option5.
The enlarged Minas-Rio will have the
option to utilise Vale's nearby rail line and Tubarão port to
transport expanded output as an alternative to the construction of
a second pipeline to Anglo American's current port facility at Açu.
All viable logistics solutions will be considered and evaluated
during pre-feasibility. The existing Minas-Rio pipeline crosses the
Vale rail network downstream from Minas-Rio, enabling a far shorter
second pipeline to connect with the rail corridor to the Tubarão
port. The Transaction does not include or affect Anglo American's
50% interest in the iron ore export facility at the port of
Açu.
The Transaction is expected to
complete in Q4 2024, subject to regulatory conditions.
Additional information
As at 31 December 2023, the value of
the gross assets of Anglo American Minério de Ferro Brasil S.A. was
US$8,069.7 million, with total profit before tax of US$1,126.7
million reported in the financial year ended 31 December
2023.
As at 31 December 2023, the assets
being contributed by Vale (and referred to above as Serpentina)
were held at nil gross asset value and had nil associated profit
before tax.
This document includes references to
the Anglo American Group, forward-looking statements and
third-party information. For information regarding the Anglo
American Group, forward-looking statements and such third-party
information, please see "Group terminology" and "Forward-looking
statements and third party information" below.
Footnotes:
1 Serpentina information as stated in Vale's technical report:
'Iron Ore Resources Assessment for the Serpentina Hills Project'.
Average in situ iron ore grade of c.40% vs Minas-Rio average of
c.32%. Serpentina proportion of friable ore is c.79% vs Minas-Rio
at c.28%.
2 Benchmark 62% CIF China.
3 Licença Prévia.
4 The pre-feasibility study must be completed within 36 months
of the Transaction completing. Providing the PFS meets an agreed
IRR hurdle rate, a feasibility study must be completed within a
further 24 months. If the FS meets an agreed IR hurdle rate, then
the preliminary environmental licence for the expansion of
Minas-Rio must be applied for.
5 Should Vale exercise its option to acquire a further 15% of
Minas-Rio, the aggregate consideration receivable in respect of
both transactions has been capped at 24.99% of Anglo American's
market capitalisation as at 21 February 2024. Anglo American will
retain the right to remove this cap at its sole discretion subject
to any approvals required under the UK Listing Rules.
For further information, please
contact:
Notes:
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