Cynthia Carroll, CEO, Anglo American
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Anglo's Carroll in quick-fire iron ore strike
Allan Seccombe
Posted: Mon, 23 Apr 2007

[miningmx.com] -- ANGLO American is increasing its exposure to iron ore in a multi-billion dollar deal with Brazil’s MMX Mineracao e Metalicos (MMX) that will give it more than 100 million tonnes of production in the next five years, CEO Cynthia Carroll said, unveiling her first transaction as head of the company.

Carroll, who took over as CEO from Tony Trahar, at the beginning of April, said there was potential for “substantial expansion” of the Brazilian project.

The project will be housed in the ferrous division of Anglo American Plc and not in its majority held South Africa-based Kumba Iron Ore, one of the world’s top five iron ore producers.
Iron ore is core
The first stage of the transaction sees Anglo paying $1.5bn to take a 49% stake in MMX Minas Rio, which owns the iron ore project in the Minas Gerais state in Brazil, developing slurry pipelines and developing an iron ore terminal at Rio de Janeiro for cape-size vessels.

The first phase of the project will produce 26.5 million tonnes of iron ore, with start up in the fourth quarter of 2009. The project is in development phase and construction permits have not yet been awarded. The first phase of the project will cost $2.35bn, which will be funded through debt finance and shareholders’ equity.

Once a second phase to double production at some point in the future is agreed, Anglo will pay a further $600m to lift its ownership of MMX Minas Rio to 50%.

Anglo will pay for the transaction out of internal cash flows, said spokeswoman Anne Dunn.

"It is a Cynthia Carroll deal," she said.

The transaction won plaudits from analysts, who rated the Brazilian asset, with a resource of 2.6 billion tonnes and an iron ore content of 40%, as a good buy because iron ore is an attractive long-term fundamentals.

"The potential for Cynthia Carroll to effect significant change in Anglo American’s culture at a time when strong operational performance, in particular good volume growth, will be particularly rewarded, is a further attraction of the stock," Simon Toyne from Numis Securities said in a note.

"We also believe this is a clear example of Cynthia Carroll’s more aggressive style, without whom we believe it would not have happened," he said.

Carroll headed Alcan's primary metals division before joining Anglo in January this year.

“Iron ore is core to Anglo American’s future growth strategy,” Carroll said, adding the Brazilian project has a long life and low-cost production profile off a large resource base.

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“Anglo American and MMX will continue to evaluate the substantial expansion potential of this deposit, in particular taking into account the extremely positive long term prospects for the iron ore industry,” she said.

The finalisation of the transaction with MMX is dependent on negotiation of the transaction documents, regulator approvals and the restructuring of MMX Minas Rio into the mining and logistics assets, in which Anglo will hold equivalent stakes.

Anglo’s shares were last up 0.2% on the JSE at R384.50 each and 0.11% in London at 27.31 pounds.

JSE-listed Kumba Iron Ore, which is 64% owned by Anglo, is a 30 million tonnes/year producer of the key ingredient for making steel. It has a pipeline of expansion projects to lift output to some 70 million tonnes by 2015.

Anglo acquired the majority stake in Kumba in November 2006.

A recent set back was the Senegalese government decision in February to award the Faleme iron ore project to Arcelor Mittal, the world’s largest steel maker. Kumba is pursuing legal action.

The $2bn Faleme project had the potential to take Kumba’s production to around 80 million tonnes.

Kumba has iron ore resources of some two billion tonnes.