(Anglo American corrects information from their web site in sixth paragraph to say Minas Rio project produces pellet feed, not iron ore pellets)
By Stephen Eisenhammer
BELO HORIZONTE, BRAZIL, May 11 (Reuters) - Anglo American may increase capacity at its Minas-Rio iron ore mine in Brazil by nearly 10 percent, a move that could cut unit costs at the troubled $13 billion project, the company’s Brazil chief executive said on Monday.
Production volume could rise as high as 29 million tonnes in the 2018-2020 period, 9.4 percent more than the mine’s expected capacity of 26.5 million tonnes a year, Paulo Castellari, Anglo’s CEO for Brazil, told reporters at a presentation near Belo Horizonte, Brazil.
Adding new capacity without large additional investments brings down per-tonne costs for bulk commodities. This could help Anglo’s Minas-Rio mine compete with low-cost producers such as Brazil’s Vale SA and Australia’s BHP Billiton Ltd and Rio Tinto Ltd, which have cash costs of between $20 and $30 per tonne.
Cash costs at Minas-Rio are expected to be between $33 and $35 per tonne, Castellari said.
This year, costs are expected to be nearly double that figure at about $60 per tonne as the recently opened mine ramps up output.
The Minas-Rio project sends iron ore 529 kilometers (329 miles) from its central highlands mine in Minas Gerais state via a slurry pipeline to a port north of Rio de Janeiro where it loads pellet-feed grade ore onto ships for export.
Minas-Rio cost $5.5 billion to acquire the rights from Brazilian tycoon Eike Batista and $8.4 billion to build. It is the largest-ever foreign investment in Brazil.
After taking a $4 billion write-down on the project in 2012, Anglo began operations at Minas-Rio late last year, nearly five years behind schedule and after a China-driven iron-ore price boom went bust.
Iron ore prices in the Chinese spot market .IO62-CNI=SI, the largest for the steel-making ingredient, rose 3.3 percent on Monday to $62.50 a tonne, the highest in more than two months.
Iron ore, though, is nearly 40 percent cheaper than a year ago and trades at some of its lowest levels since spot-market pricing became the world benchmark in 2008.
Castellari said Anglo had so far been pleased with the premium the company was receiving for its high-iron-content ore but declined to say how much more he gets per tonne above the benchmark spot price. (Additional reporting by Jeb Blount in Rio de Janeiro; Editing by Grant McCool, Marguerita Choy, David Gregorio and Chris Reese)