Anglo American Platinum jumped 3 percent on the JSE after reporting an 8 percent boost in platinum group metals to 1.2 million ounces. Photo: Reuters
HARARE - Anglo American says a leak in the pipeline that carries slurry from its Minas-Rio iron ore project in Brazil to a port in Rio de Janeiro will likely hurt its profit by up to $400million (R4.9billion) this year.

March production at Minas-Rio plummeted 30percent lower to 3million tons, mainly on the operation's suspension following the leak, the company said yesterday.

Anglo also significantly reduced the mine’s full year production guidance down to 3million tons from between 13million and 15million tons.

Earlier this month, the Brazilian state of Minas Gerais hit Anglo with a $37.73m (R461.5m) fine for pollution caused by one of two spills last month from the pipeline, according to reports.

Anglo said it expected the $8.4bn Minas-Rio project to ramp up in the fourth quarter of 2018, resulting in a reduction of between $300m and $400m in earnings before interest, taxes, depreciation and amortisation.

Anglo's share price closed 0.56percent lower on the JSE yesterday at R301.29.

The news was contained in the March 2018 production update released yesterday in which Anglo announced a 4percent growth in production for the first quarter of 2018.

Anglo chief executive Mark Cutifani said the company would “ensure the integrity of the pipeline and the protection of the natural environment, while providing as much clarity as we can for our employees, customers and other business stakeholders”.

Minas-Rio is Anglo’s most controversial project, as the costs of building and buying the mine spiralled to $13bn from the $3.6bn initial price tag.

Kumba Iron Ore, its South African subsidiary, also experienced hurdles as derailments resulted in a 12percent decline in export sales for the March quarter 2018, compared with the December 2017 quarter.

Kumba’s production increased by 4percent at the end of March 2018 compared with March 2017, driven by the 26percent higher production at Kolomela to 3.5m tons due to increased plant throughput.

South Africa’s export thermal coal production declined by 9percent to 4.3million tons, despite productivity due to lower volumes at Goedehoop, “with challenging geology in its remaining mining sections, as well as Mafube transitioning to a new pit”.

Seleh Tsatsi, an investment analyst at Anchor Capital, said yesterday that iron ore, along with coal, were the two biggest profit contributors to Anglo American.

“The Minas-Rio production guidance cut is thus a headwind.

"Having said that, a decrease in production guidance of some kind was largely expected following the operational challenges at Minas-Rio,” he said.

De Beers was the star performer with a 15percent production improvement at 8.5m carats reflecting the ramp-up of production from Gahcho Kué in Canada and increased production from Orapa in Botswana, the company said.

Anglo American Platinum jumped 3percent on the JSE after reporting an 8percent boost in platinum group metals to 1.2 million ounces.

-BUSINESS REPORT