UPDATE 2-Anglo to start building Brazil mine, gets licence

* To start building Minas Rio iron ore project in March

* Construction due to take 27-30 months before 1st output

* Shares up 1.3 pct, outperforms mining sector

(Adds shares, analyst comment)

By Eric Onstad

LONDON, Dec 10 (BestGrowthStock) – Miner Anglo American Plc (AAL.L: )
(AGLJ.J: ) 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 (.FTNMX1770: ).

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.
[ID:nLDE66S0RS]

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.

That level of production will generate about $3.3 billion
per year in earnings before interest, tax, depreciation and
amortisation (EBITDA) based on current iron ore prices, Liberum
said.

“(The licence) marks a major achievement on the critical
path for delivery of the Minas Rio project,” Anglo said.

“(It) enables Anglo American to begin the civil construction
works for the beneficiation plant and the tailings dam and begin
the construction of the mine.”

First output would be in mid to late 2013 since Anglo said
construction is due to take between 27 and 30 months.
(Reporting by Eric Onstad; Editing by Will Waterman, Mike
Nesbit)

UPDATE 2-Anglo to start building Brazil mine, gets licence