This week, Anglo American said it expects the Minas-Rio iron ore operation to begin to ramp up in the fourth quarter following an inspection of its pipeline in Brazil. The company is progressing with a full inspection of its pipeline at the iron ore operation, which is expected to take approximately 90 days to complete. The inspection includes an internal scan of every section of the pipeline and will then be followed by a detailed analysis of the data and an assessment of required remedial action. Mining operations will then resume once any repair work is completed, the pipeline has been tested, and the regulatory authorities have provided their consent to the resumption of pipeline operations.

“Our priorities are to 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,” said Mark Cutifani, CEO of Anglo American. “Our technical teams are working alongside two specialist teams in Brazil, from the Institute of Technological Research and the Federal University of Minas Gerais, to identify the specific causes of any weakness in certain sections of the pipeline.”

After the full inspection, Cutifani expects a period of analysis and remedial work prior to testing and restart of operations.

“We are currently working with our unions to agree to the appropriate terms for the approximately 35% of our employees at Minas-Rio who will be on an extended period of leave, including providing training during that time, in addition to a pay and benefits package,” Cutifani said. “The majority of our Minas-Rio employees continue to be deployed across our operations in Brazil, including on the construction work required to secure our Step 3 operating license in the first half of 2019 to enable the full ramp-up of Minas-Rio to 26.5 million [metric tons per year].”

The halt in production comes at a time when several iron ore producers have issued downward revisions to production guidance, tightening the market. “A mine that was due to produce 16 million mt of iron ore this year will now produce just 3 million mt,” said Alex Griffiths, senior research analyst at Wood Mackenzie. “The iron ore that Minas Rio was producing — pellet feed — is a type that is currently in demand, with record price premiums achieved late last year.”

Minas Rio will now miss the opportunity to sell its product during the tail-end of these highs. And, Griffiths explained, with the market tightening, they could see premiums for quality ores stay higher for longer.