REG - Anglo American PLC - Anglo American to partner with Vale on Serpentina

Anglo AmericanAnnouncement

22/02/2024 07:15

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RNS Number : 0068E  Anglo American PLC  22 February 2024

 22 February 2024
 Anglo American secures additional multi-billion tonne high quality iron ore
 resource at Minas-Rio

Anglo American plc ("Anglo American") announces that it has agreed to acquire
and integrate the contiguous Serra da Serpentina ("Serpentina") high quality
iron ore resource owned by Vale SA ("Vale") into Anglo American's Minas-Rio
mine in Brazil ("the Transaction"). Anglo American will continue to control,
manage and operate the Minas-Rio operation, including any future expansions
that relate to Serpentina.

 

Duncan Wanblad, Chief Executive of Anglo American, said: "The opportunity to
partner with Vale to secure a high quality iron ore resource of this scale and
quality, right next door to Minas-Rio, is compelling - particularly given all
the physical synergies of our mining and processing infrastructure to create a
single optimised operation, combined with the option to access Vale's rail and
port logistics. The sheer scale and quality of the Serpentina orebody offers
significant value, including through the scope to expand the production of the
premium grade pellet feed products we sell to steelmaking customers as they
focus on decarbonising their own processes for decades to come. The Minas-Rio
DRI-grade product sells into one of the most attractive growth segments
available in our industry today."

 

Serpentina(1) contains a Mineral Resource of 4.3 billion tonnes of iron ore,
with a significantly larger total endowment upside that reflects the total
strike length of the orebody of more than twice that of Minas-Rio. Serpentina
is also of a higher iron ore grade than Minas-Rio's already high grade ore and
contains predominantly softer friable ore that together are expected to
translate into lower unit costs and capital requirements for its extraction.
The combination of the two resources also offers considerable expansion
opportunities, including the potential to double production, which Anglo
American and Vale will assess under the Transaction's terms.

 

Eduardo Bartolomeo, CEO of Vale, commented: "We are pleased to partner with
Anglo American to support the growing demand for high quality iron ore as our
clients accelerate their transition to low carbon emissions steelmaking.
Minas-Rio is a Tier-1 asset that will benefit from great synergies with
Serpentina's deposit and Vale's logistics and we are confident this
partnership will unlock significant value to all of our stakeholders. We plan
on allocating our share of the high-quality pellet feed to our pellet plants
in Brazil and in the future to the Mega Hubs producing iron ore briquettes."

 

Under the Transaction's terms, Vale will contribute Serpentina and US$157.5
million in cash to acquire a 15% shareholding in the enlarged Minas-Rio,
subject to normal completion adjustments. If the average benchmark iron ore
price(2) remains above US$100/t or below US$80/t for four years, a purchase
price adjustment payment will be made to Anglo American or Vale, respectively,
in line with an agreed formula.

 

Following completion of the Transaction, Vale will receive its pro rata share
of Minas-Rio production. Vale will also have an option to acquire an
additional 15% shareholding in the enlarged Minas-Rio for cash if and when
certain events relating to a future expansion of Minas-Rio occur, including
the receipt of the requisite environmental licence(3) for an expansion
following the completion of a pre-feasibility study (PFS) and feasibility
study (FS)(4), at fair value calculated at the time of exercise of the
option(5).

 

The enlarged Minas-Rio will have the option to utilise Vale's nearby rail line
and Tubarão port to transport expanded output as an alternative to the
construction of a second pipeline to Anglo American's current port facility at
Açu. All viable logistics solutions will be considered and evaluated during
pre-feasibility. The existing Minas-Rio pipeline crosses the Vale rail network
downstream from Minas-Rio, enabling a far shorter second pipeline to connect
with the rail corridor to the Tubarão port. The Transaction does not include
or affect Anglo American's 50% interest in the iron ore export facility at the
port of Açu.

 

The Transaction is expected to complete in Q4 2024, subject to regulatory
conditions.

 

 

Additional information

As at 31 December 2023, the value of the gross assets of Anglo American
Minério de Ferro Brasil S.A. was US$8,069.7 million, with total profit before
tax of US$1,126.7 million reported in the financial year ended 31 December
2023.

 

As at 31 December 2023, the assets being contributed by Vale (and referred to
above as Serpentina) were held at nil gross asset value and had nil associated
profit before tax.

 

 

This document includes references to the Anglo American Group, forward-looking
statements and third-party information. For information regarding the Anglo
American Group, forward-looking statements and such third-party information,
please see "Group terminology" and "Forward-looking statements and third party
information" below.

 

Footnotes:

 

(1) Serpentina information as stated in Vale's technical report: 'Iron Ore
Resources Assessment for the Serpentina Hills Project'. Average in situ iron
ore grade of c.40% vs Minas-Rio average of c.32%. Serpentina proportion of
friable ore is c.79% vs Minas-Rio at c.28%.

(2) Benchmark 62% CIF China.

(3) Licença Prévia.

(4) The pre-feasibility study must be completed within 36 months of the
Transaction completing. Providing the PFS meets an agreed IRR hurdle rate, a
feasibility study must be completed within a further 24 months. If the FS
meets an agreed IR hurdle rate, then the preliminary environmental licence for
the expansion of Minas-Rio must be applied for.

(5) Should Vale exercise its option to acquire a further 15% of Minas-Rio, the
aggregate consideration receivable in respect of both transactions has been
capped at 24.99% of Anglo American's market capitalisation as at 21 February
2024. Anglo American will retain the right to remove this cap at its sole
discretion subject to any approvals required under the UK Listing Rules.

 

 

 

 

For further information, please contact:

 

 Media                                                                              Investors

 UK                                                                                 UK

 James Wyatt-Tilby                                                                  Paul Galloway

 james.wyatt-tilby@angloamerican.com                                                paul.galloway@angloamerican.com (mailto:paul.galloway@angloamerican.com)
 (mailto:james.wyatt-tilby@angloamerican.com)

                                                                                  Tel: +44 (0)20 7968 8718
 Tel: +44 (0)20 7968 8759

                                                                                  Emma Waterworth
 Marcelo Esquivel                                                                   emma.waterworth@angloamerican.com (mailto:emma.waterworth@angloamerican.com)

Tel: +44 (0) 20 7968 8574
 marcelo.esquivel@angloamerican.com (mailto:marcelo.esquivel@angloamerican.com)

 Tel: +44 (0)20 7968 8891

                                                                                  Juliet Newth

                                                                                  juliet.newth@angloamerican.com (mailto:juliet.newth@angloamerican.com)
 Rebecca Meeson-Frizelle

                                                                                  Tel: +44 (0)20 7968 8830
 rebecca.meeson-frizelle@angloamerican.com

 (mailto:rebecca.meeson-frizelle@angloamerican.com)

 Tel: + 44 (0)20 7968 1374                                                          Michelle Jarman

                                                                                    michelle.jarman@angloamerican.com (mailto:michelle.jarman@angloamerican.com)

 South Africa

                                                                                  Tel: +44 (0)20 7968 1494
 Nevashnee Naicker

 nevashnee.naicker@angloamerican.com

 Tel: +27 (0)11 638 3189

 Sibusiso Tshabalala

 sibusiso.tshabalala@angloamerican.com
 (mailto:sibusiso.tshabalala@angloamerican.com)

 Tel: +27 (0)11 638 2175

Notes:

Anglo American is a leading global mining company and our products are the
essential ingredients in almost every aspect of modern life. Our portfolio of
world-class competitive operations, with a broad range of future development
options, provides many of the future-enabling metals and minerals for a
cleaner, greener, more sustainable world and that meet the fast growing every
day demands of billions of consumers. With our people at the heart of our
business, we use innovative practices and the latest technologies to discover
new resources and to mine, process, move and market our products to our
customers - safely and sustainably.

 

As a responsible producer of copper, nickel, platinum group metals, diamonds
(through De Beers), and premium quality iron ore and steelmaking coal - with
crop nutrients in development - we are committed to being carbon neutral
across our operations by 2040. More broadly, our Sustainable Mining Plan
commits us to a series of stretching goals to ensure we work towards a healthy
environment, creating thriving communities and building trust as a corporate
leader. We work together with our business partners and diverse stakeholders
to unlock enduring value from precious natural resources for the benefit of
the communities and countries in which we operate, for society as a whole, and
for our shareholders. Anglo American is re-imagining mining to improve
people's lives.

www.angloamerican.com (http://www.angloamerican.com)

 

 

 

Group terminology

In this document, references to "Anglo American", the "Anglo American Group",
the "Group", "we", "us", and "our" are to refer to either Anglo American plc
and its subsidiaries and/or those who work for them generally, or where it is
not necessary to refer to a particular entity, entities or persons. The use of
those generic terms herein is for convenience only, and is in no way
indicative of how the Anglo American Group or any entity within it is
structured, managed or controlled. Anglo American subsidiaries, and their
management, are responsible for their own day-to-day operations, including but
not limited to securing and maintaining all relevant licences and permits,
operational adaptation and implementation of Group policies, management,
training and any applicable local grievance mechanisms. Anglo American
produces group-wide policies and procedures to ensure best uniform practices
and standardisation across the Anglo American Group but is not responsible for
the day to day implementation of such policies. Such policies and procedures
constitute prescribed minimum standards only. Group operating subsidiaries are
responsible for adapting those policies and procedures to reflect local
conditions where appropriate, and for implementation, oversight and monitoring
within their specific businesses.

 

Disclaimer

This document is for information purposes only and does not constitute, nor is
to be construed as, an offer to sell or the recommendation, solicitation,
inducement or offer to buy, subscribe for or sell shares in Anglo American or
any other securities by Anglo American or any other party. Further, it should
not be treated as giving investment, legal, accounting, regulatory, taxation
or other advice and has no regard to the specific investment or other
objectives, financial situation or particular needs of any recipient.

 

Forward-looking statements and third party information

This document includes forward-looking statements. All statements other than
statements of historical facts included in this document, including, without
limitation, those regarding Anglo American's financial position, business,
acquisition and divestment strategy, dividend policy, plans and objectives of
management for future operations, prospects and projects (including
development plans and objectives relating to Anglo American's products,
production forecasts and Ore Reserve and Mineral Resource positions) and
sustainability performance related (including environmental, social and
governance) goals, ambitions, targets, visions, milestones and aspirations,
are forward-looking statements. By their nature, such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of Anglo
American or industry results to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements.

 

Such forward-looking statements are based on numerous assumptions regarding
Anglo American's present and future business strategies and the environment in
which Anglo American will operate in the future. Important factors that could
cause Anglo American's actual results, performance or achievements to differ
materially from those in the forward-looking statements include, among others,
levels of actual production during any period, levels of global demand and
commodity market prices, unanticipated downturns in business relationships
with customers or their purchases from Anglo American, mineral resource
exploration and project development capabilities and delivery, recovery rates
and other operational capabilities, safety, health or environmental incidents,
the effects of global pandemics and outbreaks of infectious diseases, the
impact of attacks from third parties on our information systems, natural
catastrophes or adverse geological conditions, climate change and extreme
weather events, the outcome of litigation or regulatory proceedings, the
availability of mining and processing equipment, the ability to obtain key
inputs in a timely manner, the ability to produce and transport products
profitably, the availability of necessary infrastructure (including
transportation) services, the development, efficacy and adoption of new or
competing technology, challenges in realising resource estimates or
discovering new economic mineralisation, the impact of foreign currency
exchange rates on market prices and operating costs, the availability of
sufficient credit, liquidity and counterparty risks, the effects of inflation,
terrorism, war, conflict, political or civil unrest, uncertainty, tensions and
disputes and economic and financial conditions around the world, evolving
societal and stakeholder requirements and expectations, shortages of skilled
employees, unexpected difficulties relating to acquisitions or divestitures,
competitive pressures and the actions of competitors, activities by courts,
regulators and governmental authorities such as in relation to permitting or
forcing closure of mines and ceasing of operations or maintenance of Anglo
American's assets and changes in taxation or safety, health, environmental or
other types of regulation in the countries where Anglo American operates,
conflicts over land and resource ownership rights and such other risk factors
identified in Anglo American's most recent Annual Report. Forward-looking
statements should, therefore, be construed in light of such risk factors and
undue reliance should not be placed on forward-looking statements. These
forward-looking statements speak only as of the date of this document. Anglo
American expressly disclaims any obligation or undertaking (except as required
by applicable law, the City Code on Takeovers and Mergers, the UK Listing
Rules, the Disclosure and Transparency Rules of the Financial Conduct
Authority, the Listings Requirements of the securities exchange of the JSE
Limited in South Africa, the SIX Swiss Exchange, the Botswana Stock Exchange
and the Namibian Stock Exchange and any other applicable regulations) to
release publicly any updates or revisions to any forward-looking statement
contained herein to reflect any change in Anglo American's expectations with
regard thereto or any change in events, conditions or circumstances on which
any such statement is based.

 

Nothing in this document should be interpreted to mean that future earnings
per share of Anglo American will necessarily match or exceed its historical
published earnings per share. Certain statistical and other information
included in this document is sourced from third party sources (including, but
not limited to, externally conducted studies and trials). As such it has not
been independently verified and presents the views of those third parties, but
may not necessarily correspond to the views held by Anglo American and Anglo
American expressly disclaims any responsibility for, or liability in respect
of, such information.

©Anglo American Services (UK) Ltd 2024.  (TM) and (TM) are trademarks of
Anglo American Services (UK) Ltd.

 

 

Legal Entity Identifier: 549300S9XF92D1X8ME43

 

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