Vale to divest Mozambique JV with Mitsui as part of coal exit plan

Vale SA signed a heads of agreement to acquire Mitsui & Co. Ltd.'s stakes in the Moatize coal mine and the Nacala Logistics Corridor project in Mozambique, with Vale planning to divest the assets as part of its goal to become carbon-neutral by 2050.

Vale already owns 80% of Moatize, with Mitsui holding 15% and Empresa Mocambicana de Exploracao Mineira SA holding 5%. Vale and Mitsui each own a 50% stake in Nacala, which includes a 912-kilometer railway project that transports coal from the mine to the port of Nacala through neighboring Malawi. In September 2016, Mitsui agreed to pay up to $450 million for its stake in Moatize and pay $348 million for its stake in Nacala.

The Brazilian miner said Jan. 20 that it agreed to acquire Mitsui's entire stakes in Moatize and Nacala for $1 each. Closing is targeted in 2021, subject to the execution of a definitive agreement.

After the purchase, Vale will start the process of divesting the assets. While it is searching for a buyer, the company will continue to support the project's ramp-up to 15 million tonnes per year in the second half of 2021 and 18 Mt/y in 2022. It also vowed to honor its obligations regarding labor rights and resettlement.

Upon closing, Vale will consolidate Nacala's financing for the project, which has an outstanding balance of about $2.5 billion.

Vale expects about $300 million per year in operating expenses at Moatize associated with the Nacala tariff to be reclassified to its financial expenses, debt amortization, sustaining capital and others, resulting in an increase in its coal business EBITDA. The company targets $25 million in annual savings from the refinancing of the project financing and streamlining of the asset management structure.