UPDATE: Anglo American May Face New Hitch in Brazil Iron-Mine Development

--Court injunction latest challenge in development of Minas-Rio project

--Ruling bars development within 250 meters of underground cavern

--Anglo American has appealed decision, awaiting final ruling

(Updates with comments from Anglo American in seventh paragraph.)

By Diana Kinch

RIO DE JANEIRO--Globally-diversified mining company Anglo American PLC (AAL.LN, AAUKY) may face a new legal hitch in the development of its major Minas-Rio iron-ore project in southeast Brazil.

A regional federal court in Minas Gerais state, where Anglo's Minas-Rio mine is located, last week upheld an injunction by a federal court in Belo Horizonte that prevents the company from developing activities within 250 meters of a natural cavern said to be of environmental importance.

According to Minas Gerais state's public ministry, Anglo had planned to install an iron-ore conveyor belt within 100 meters of the underground cave, known as CAI 03, which measures 396 square meters and is frequented by wildlife threatened by extinction.

"The speleology studies presented by the company are incomplete," said the public ministry in a statement. The ministry is calling for Brazil's federal environmental watchdog Ibama to participate in the environmental licensing of activities in regions where there are caves, which are considered federal patrimony, a public ministry spokesman said.

Anglo American said in its half-year financial report last month that it was delaying the start-up of Minas-Rio by about one year to the second half of 2014, as the licensing and construction progress has been "hindered by legal actions." The project has been dogged by a series of licensing delays and legal rulings which have affected construction of a concentrator plant and energy transmission line, partly due to archeological investigations at caves in the region and land-tenure issues.

It is unclear whether the latest legal restriction may represent a further delay to the project, which could cost some $5.8 billion to complete and is planned to produce 26.5 million metric tons a year initially of iron ore, to sell within Brazil and to export.

In an emailed statement, Anglo said that it had appealed the decision and was awaiting a final ruling. "Anglo American emphasizes that it operates in accordance with existing legislation and follows all applicable legal channels," the company said.

Anglo chief executive Cynthia Carroll in late July described Minas-Rio as "one of the largest and most complex projects in the world." The executive said that due to the various impediments, the company "cannot determine with confidence the date for first production."

However, Ms. Carroll said at the time that "Minas-Rio is a high quality iron ore resource with very significant expansion potential and, despite current challenges, will prove to be a major contributor to the Group for many decades to come."

-Jeff Fick in Rio de Janeiro contributed to this report.

Write to Diana Kinch at [e-mail]

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