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Anglo American will take a $4bn writedown on the value of its iron ore project in Brazil as costs continue to rise for the world's biggest mining companies.
Anglo, the world's largest platinum producer, raised its cost estimate for the Minas-Rio iron ore project for the sixth time, the company said Tuesday in a statement published on its website, taking the most recent tally to $8.8bn. The original estimate was $2.6bn.
"We are clearly disappointed that the diversity of challenges that our Minas-Rio project has faced has contributed to a significant increase in capital expenditure, leading to the impairment we have recorded," said outgoing Anglo CEO Cynthia Carroll. "Despite the difficulties, we continue to be confident of the medium and long term attractiveness and strategic positioning of Minas-Rio and we remain committed to the project."
The $4bn writedown will hit the company on a post-tax basis, Anglo said in the statement, and be booked as of 31 December.
Anglo's writedown comes just two weeks after Tom Albanese was forced out as CEO of Rio Tinto after the world's second largest mining group announced a shock $14bn charge to the value of key mining assets - Rio Tinto Alcan and Pacific Aluminium - that he directed the company to purchase less than five years ago.
Anglo bought Minas Rio in 2007 under Carroll's plan to diversify the group's revenue base outside of its South African roots for around $5.5bn and expects furhter development costs to pass $8bn.
Carroll, who served as CEO for just over five years and was both the first woman and the first non-South African to head the group, will be replaced by former AngloGold Ashanti CEO Mark Cutifani on 3 April as it struggles to hold costs in check in Brazil and navigate increasingly complicated labour relations in South Africa.
Anglo American shares were little changed at 1,874 pence each in early London trading. The shares have fallen around 28 percent over the past year.