Anglo American (LON:AAL) has inked an agreement with the mineral-rich Brazilian state of Minas Gerais to invest up to $800 million (4.4bn reais) through 2025 in local operations.
Most of the investment will go to its giant Minas Rio iron ore mine, where the company plans improvements in pipeline, technology, civil works and future expansions, the state’s government said.
Anglo’s commitment adds to the more than $147 billion reais ($27 billion) Minas Gerais has already lined from companies that operate or will begin operation in the state by 2025, officials said.
The world’s number four diversified miner bought the iron ore project in Southeast Brazil during the commodity price boom of 2007-2008, paying local ex-billionaire Eike Batista $5.5 billion for it.
Anglo then spent another $8.4 billion, more than twice what was originally projected, to bring Minas Rio into production in 2014.
The deal soon soured, as rising global iron ore output overwhelmed demand, causing prices to tumble 80% from their 2011 peak. The miner also saw itself forced to write down the value of the asset by about $4bn, underscoring how the group mistimed its entry into the iron ore sector.
And while prices recovered in 2016 (they climbed 81%), the extreme volatility for most of the year brought into question whether Anglo’s costly bet for iron ore would or would not eventually pay off.
Anglo American’s iron ore production in the three months to Sept. 30 Iron ore production jumped by 15%, driven primarily by a 22% uplift to 6,099,500 tonnes from Minas-Rio, the miner said in October.
Minas-Rio comprises a 529km-long pellet feed-transporting slurry pipeline project. The mine is expected to reach a capacity of 26.5 million tonnes by 2022.
Between 2014 and 2020, the company spent millions in protecting the biodiversity of the area, located in one of Brazil’s priority conservation zones. The investments, including $3.5 million for the conservation of the 12,000 hectares of legally constituted forest in the region, $6.4 million for the restoration of a further 1,300 hectares and $2.4 million on the monitoring of local fauna, according to Anglo American’s website.