UPDATE 1-Anglo American sells Brazilian Amapa mine to Zamin

Fri Jan 4, 2013 4:00am EST

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LONDON Jan 4 (Reuters) - Miner Anglo American and joint venture partner Cliffs Natural Resources have agreed to sell their Amapa iron ore operation in Brazil to former commodities trader Pramod Agarwal's Zamin Ferrous for an undisclosed sum.

Anglo bought control of Amapa, in the very north of Brazil, from Brazilian billionaire Eike Batista's MMX in 2008, as part of the $5.5 billion Minas Rio acquisition. But Amapa was deemed non-core and officially put on the block last year as the miner streamlines its asset portfolio globally.

The sale announced on Friday, which adds to privately owned Zamin's portfolio of iron ore assets in Latin America, will allow Anglo to focus on its flagship Minas Rio in Brazil, where the miner has battled rising costs and permitting delays.

Minas Rio has been a key factor in the souring of relations between Anglo's chief executive and shareholders, and, along with an upcoming review of the miner's platinum arm, is seen as critical to the recovery of its underperforming shares.

Anglo said in November that Minas Rio is now unlikely to cost less than $8 billion, up from the miner's most recent forecast of $5.8 billion - already twice original estimates.

"Of greater significance for Anglo's shares (than Amapa's sale) would be if (Friday's) transaction were to be followed by further portfolio rationalisation at its Brazilian iron ore assets," JP Morgan analysts said on Friday, adding investors would likely welcome a strategic partner for Anglo in Minas Rio.

Amapa has potential for expansion according to Zamin, which owns the Zamapa iron ore processing facility in the same state, but limitations of the operation include a restriction on capesize vessels in the Amazon port that serves it, curtailing the amount of ore that can be shipped at any one time.

Zamin, however, said the acquisition would allow it to produce 45 million tonnes per year as a group within five years.

"Zamin is buying at a good time in the cycle with iron ore prices recovering recently following the collapse in the middle of 2012 and renewed confidence in the industry's prospects," Zamin founder Agarwal said.

An internal valuation by Anglo in 2011 put Amapa's value at $1.5 billion, meaning Anglo's 70 percent stake would be worth at least $1 billion, but that value is expected to have tumbled as the iron ore price has weakened and prospects for Chinese growth clouded.

One news report in September put the value at closer to $400 to $600 million and analysts on Friday said they estimated a price tag of well below that amount.

Cliffs, in its announcement overnight, said the value of Amapa would need to be adjusted to reflect fair value, adding it would take a pretax impairment charge of about $380 to $420 million.

Analysts at Nomura estimated Anglo would also likely take an impairment charge of some form against the asset.

Sources familiar with the matter had told Reuters in November that potential bidders considering the asset included commodities trader Glencore, Russian steelmaker Severstal and Australia's Centaurus, as well as Zamin, which already has assets in Brazil.

Anglo said in its 2012 annual report that Amapa was expected to produce 5.5 million tonnes of iron ore this year.

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