JOHANNESBURG/VANCOUVER (miningweekly.com) – Diversified miner Anglo American expects the continued disruptions at its Minas-Rio iron-ore mine, in Brazil, to result in a reduction in earnings before interest, taxes, depreciation and amortisation of between $300-million and $400-million for this year.

Production was suspended at the mine in March, after leaks were discovered in the pipeline that transports iron-ore from its Minas Gerais mine, to the port in Rio de Janeiro state.

Brazil's environmental regulator Ibama fined Anglo $21.1-million for the leaks and ordered it to halt mining operations.

“Our own technical teams are working alongside two specialist teams in Brazil, from the Institute of Technological Research and the Federal University of Minas Gerais, to identify the specific causes of any weakness in certain sections of the pipeline,” CEO Mark Cutifani said in a statement on Tuesday.

The inspection includes an internal scan of every section of the pipeline and will then be followed by a detailed analysis of the data and an assessment of required remedial action.

Following the full inspection, Anglo expects operations to restart upon the receipt of regulatory consent.

“We are currently working with our unions to agree the appropriate terms for the approximately 35% of our employees at Minas-Rio who will be on an extended period of leave, including providing training during that time, in addition to a pay and benefits package,” he said.

MISSED OPPORTUNITY
Market research firm and consultancy Wood Mackenzie said in a statement that the news comes at a bad time for the operation, since the iron-ore that Minas Rio was producing – pellet feed – is a type that is currently in demand, with record price premiums achieved late last year. The halt in production also comes at a time when several iron-ore producers have issued downward revisions to production guidance, resulting in a tighter market.

“Minas Rio will now miss the opportunity to sell its product during the tail-end of these highs. And with the market tightening, we could see premia for quality ores stay higher for longer. Whilst Minas Rio is not producing, the company is not able to fully demonstrate its ongoing commitments to the mining tenements. Therefore, this could potentially delay Minas Rio's ramp-up to its ultimate capacity of 26.5-million tonnes per year," analyst Alex Griffiths said in a statement.