Global mining major Anglo American has been forced to take an impairment charge of $4bn due to rising development costs at its Minis-Rio iron ore project in Brazil.
Total capital expenditure for the Minas-Rio project is now pegged at $8.8bn, provided a centrally held risk contingency of $600m is fully utilised.
Cost escalations for the project were attributed to the delay in the first ore on ship (FOOS) date, which has been moved to end of 2014; as well as inflation in construction and labour costs.
The company commissioned and completed a detailed cost and schedule review of the project in November 2012, which included inputs from third parties.
Anglo-American CEO Cynthia Carroll said that the company was disappointed with the diverse challenges the project came up against leading to the write down, but added, "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."
Carroll is set to leave Anglo American in April after shareholders demanded a change of leadership after a drop in profits, it was reported in October.
News of the writedown comes less than two weeks after Rio Tinto took an impairment charge of $14bn related to its aluminium assets and coal division in Mozambique.
Image: The first phase of the Minas-Rio iron ore project is set to begin at the end of 2014. Photo: Anglo American.