Anglo American to produce iron ore from Vale’s deposit in Brazil

Anglo American (LSE: AAL) has signed a deal to integrate Vale‘s (NYSE: VALE) Serra da Serpentina deposit into its Minas-Rio iron ore complex.

Vale will provide resources, including $157.5 million in cash to acquire a 15% shareholding in the enlarged Minas-Rio operation in Minas Gerais, which will continue to be controlled by Anglo.

“The sheer scale and quality of the Serpentina orebody offers significant value, including through the scope to expand the production of the premium grade pellet feed products we sell to steelmaking customers as they focus on decarbonizing their own processes for decades to come,” Duncan Wanblad, CEO of Anglo American, said in a release.

Serpentina contains total resources of 4.3 billion tonnes of iron ore.

Under the partnership deal, if the average benchmark iron ore price remains above US$100 per tonne or below US$80 per tonne for four years, a purchase price adjustment payment will be made to Anglo American or Vale, respectively, in line with an agreed formula.

Once the transaction is completed, Vale will receive its pro rata share of Minas-Rio production.

The enlarged Minas-Rio will have the option to utilize Vale’s nearby rail line and Tubarão port to transport expanded output as an alternative to the construction of a second pipeline to Anglo American’s current port facility at Açu. 

Anglo American reported a steep fall in profit on Thursday and lowered its dividend after a slump in key commodities it produces.

Prices for diamonds and platinum group metals — commodities unique to its portfolio — have plunged in the past year. The company was also forced to drastically slash its copper production goals, which sent its shares tumbling late last year.

Anglo reported a more than 30% fall in underlying earnings to US$10 billion while cutting its final dividend by 45% from the same period in 2022.

Shares of Anglo American were up 3.1% by 11:10 p.m. ET. The company has a market capitalization of $30.2 billion.

Vale shares were up 1%. The Brazilian miner has a market capitalization of $61 billion.