October 16, 2018 / 10:15 PM / a month ago

UPDATE 1-Anglo sees Minas Rio ramp-up target reached around 2021

(Adds no immediate comment from Bahrain Steel, Prumo)

By Alexandra Alper

RIO DE JANEIRO, Oct 16 (Reuters) - Anglo American Plc should restart operations at its Brazilian Minas Rio iron ore mine in November or December and a planned ramp-up to 26.5 million tonnes per year is likely to be reached in 2021, the miner's Brazil chief said on Tuesday.

The company halted production at the Minas Rio mine after two leaks in March in a pipeline that channels slurry more than 500 km (310 miles) from the mine in Minas Gerais state to a port in Rio de Janeiro state.

The company has been inspecting the pipeline from April through October, and is working to change out about 4 kilometers of it out of caution after it discovered cracks in the welding.

"We should finish the replacement in November. So everything is on track for us to resume operations in the fourth quarter. It could be in November or December," the Brazil chief executive, Ruben Fernandes, told Reuters on the sidelines of a commodities conference in Rio de Janeiro.

Purchased at the height of the commodities boom a decade ago for $5.5 billion, Minas Rio is Anglo American's biggest development project. The London-based company was once counting on Minas-Rio to produce 26.5 million tonnes of iron ore by 2016. As the project hit delays, it had shifted to an output goal of 24 million to 26.5 million tonnes for 2020.

The company clinched two key permits to ramp up production toward that goal in January, but now expects to receive the key operating license in May 2019. That means production is likely to hit the long-awaited target of 26.5 million tonnes in 2021.

"It would be around 2021. It is not a very firm date because it depends on the plant's performance," Fernandes said, adding that production should hit the target pace by the end of 2020.

Fernandes reiterated Anglo American's prior estimate of a $300 million to $400 million impact on earnings from the spills this year.

In June, Reuters reported that Anglo American had suspended a nearly $1 billion annual contract to supply Bahrain Steel with iron ore by declaring force majeure in April after the spills.

On Tuesday, Fernandes acknowledged that the two companies were already in arbitration to renegotiate the contract prior to the declaration of force majeure following the spills.

He described the talks as friendly, noting that they include issues like volume and quality, in addition to the incident.

"Without a doubt they are an excellent client," he said of the Gulf-based company. "There is no reason why we won't reach a long term deal with them."

Fernandes said Anglo was also in arbitration with Ferroport, a joint venture it has with port operator Prumo Logistica SA , after declaring force majeure on that contract as well.

Bahrain Steel and Prumo did not immediately respond to requests for comment. (Reporting by Alexandra Alper Editing by Marguerita Choy and Leslie Adler)

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