Anglo American plc ("Anglo American") has completed the detailed cost and schedule review of its Minas-Rio iron ore project in Brazil announced in November 2012. The review included third party input and examined the outstanding capital expenditure requirements in light of current development progress and the disruptive challenges faced by the project. The review included a detailed re-evaluation of all aspects of the outstanding schedule, with a focus on maximising value and mitigating risk.

Following its November 2012 guidance and the completion of the review, capital expenditure for the Minas-Rio project is projected to increase to $8.8 billion, if a centrally held risk contingency of $600 million is utilised in full. On the basis of the revised capital expenditure requirements and its assessment of the full potential of phase one of the project (excluding at this stage the potential for future expansions to 90 mtpa), Anglo American will record an impairment charge of $4.0 billion at 31 December 2012 on a post-tax basis. Despite the challenges the Minas-Rio project has faced, Anglo American is targeting first ore on ship (FOOS) by the end of 2014.

Cynthia Carroll, Chief Executive of Anglo American, said: "We are clearly disappointed that the diversity of challenges that our Minas-Rio project has faced has contributed to a significant increase in capital expenditure, leading to the impairment we have recorded. Despite the difficulties, we continue to be confident of the medium and long term attractiveness and strategic positioning of Minas-Rio and we remain committed to the project.

"Minas-Rio is a world class iron ore project of rare magnitude and quality and represents one of the world's largest undeveloped resources. The published resource has increased more than fourfold since acquisition to 5.77 billion tonnes and we believe that further resource potential exists⁽¹⁾ through our ongoing exploration. The first phase of the project will begin its ramp up at the end of 2014, with operating costs expected to be highly competitive in the first quartile of the FOB cash cost curve, averaging approximately $30/tonne⁽²⁾ over the life of mine and generating significant free cashflow."

Anglo American announced in December 2012 that all three injunctions that had disrupted the project in 2012, contributing to the delay of FOOS to the end of 2014, had been lifted. Construction progress is on track with the revised construction schedule announced in July 2012:

• The mine and beneficiation plant are on track – 92% of the earthworks have been completed at the beneficiation plant, the first of two grinding mills has been installed and the civil works for the secondary crusher are complete
• At the 525km slurry pipeline, almost 50% of the pipeline has been laid (approximately 247km), with 76% of the land cleared for earthworks and pipe installation to take place
• The filtration plant is on schedule for completion by June 2013
• The port's two stackers and reclaimer have been erected and the shiploader installation is under way.

The primary drivers of the capital expenditure increase from the previous estimate in 2011 relate to:

• The delay in FOOS from late 2013 to late 2014
• Scope changes, including those agreed as part of the review process and taking into consideration additional land access costs and purchases, increased earth and civil works required following access to various sites along the pipeline and the increased costs of meeting licence conditions
• Construction inflation costs, including contract adjustments and mining equipment price increases
• A centrally held risk contingency of $600 million to accommodate a number of potential factors to achieve the FOOS date of the end of 2014, including the potential for additional price escalation, productivity acceleration and finalisation of the extent of earth and civil works required on land that is yet to be accessed.

The delivery of the project on the proposed schedule and to the revised budget is dependent upon a number of development milestones being achieved over the next twelve months and other factors, including:

• The schedule for the completion of the transmission line to the beneficiation plant and the development of the pipeline assumes that a number of residual land access constraints be resolved by the end of March 2013
• At the mine site, pre-stripping activity needs to begin in April. Prior to that, further work is required in order to address matters relating to caves in the mine area
• At the beneficiation plant, the tailings dam needs to be completed by the end of May in order to be filled during the forthcoming rainy season
• Not encountering unexpected interventions, such as injunctions relating to licences.

The project team continues to work towards satisfying the licence conditions and associated programmes (sustainable development, social and infrastructure commitments) in order to secure the necessary operating licences in 2014.

_{(1) As detailed in the Anglo American 2011 Annual Report
(2) $30/tonne on a real basis}