Anglo American is unlikely to achieve a "strong" price from the possible sale of its Minas-Rio iron ore operation in Brazil, Investec analysts said Wednesday, as the miner reportedly contemplates selling off Brazilian assets.
"We flagged that the company should consider exiting iron ore (Minas Rio) in May last year due to downside risks which have come to pass," Investec said in a note.
"Sadly the company is an increasingly distressed seller of assets at what we hope is close to the bottom of the cycle for commodities, so realizing strong prices will be a struggle."
Brazilian newspaper O Globo earlier reported Anglo was due to take bids on February 15 on assets including Minas-Rio, a mine exporting pellet feed.
Customers are a mix of operators of pellet plants, such as the idled units owned by Samarco, and mills using the high grade concentrate as an additive in sinter.
An Anglo American spokesman in London declined to comment on "market speculation," while adding that details would be forthcoming in the annual results presentation on February 16.
Anglo said on January 28 in a quarterly update that the production strategy for Minas-Rio was being revised to ensure lower operating costs.
Minas-Rio produced a lower than expected 3.3 million mt in Q4 2015, which was still up 11% from Q3 2015 as it ramps up the Minas Gerais mine and logistics chain to a port in Rio de Janeiro state.
In 2015, Minas-Rio produced 9.17 million mt, below the company's 10 million mt target for 2015 that was published on December 8, 2015.
Anglo explained lower output in Q4 was due to iron ore quality variability and drought-related water availability.
"Following recent rainfall, water availability is now back to normal, whilst the ore variability is expected to be overcome as the mining footprint expands over time," Anglo said in the January 28 statement.
Anglo's latest plans to date are for Minas-Rio output to reach 18 million-21 million mt in 2016 and 21 million-23 million mt in 2017, reaching full 26.5 million mt production capacity by 2018. The profile marks a slower ramp-up than earlier guidance.
Minas-Rio began operating at the end of Q3 2014 and produces concentrate and feed for blast furnace and direct reduction pellet markets.
