The Brazilian mining and metals giant Vale is selling a stake in its African coal operations to the Japanese trading company Mitsui & Company in a deal worth about $950 million. The sale comes after commodity prices, both for coal and for Vale’s metal exports, have fallen sharply.

Counting both cash and future investment, Mitsui will pay $638 million for a 14 percent stake in the Moatize coal mine in Mozambique, and another $313 million for a 35 percent stake in the Nacala Logistics Corridor, a rail and port network, according to a statement filed on Tuesday morning with Brazil’s securities and exchange commission.

The two companies plan to jointly raise $2.7 billion in project finance capital, of which $1.7 billion will pay to complete the Nacala corridor and $1 billion will pay down Vale’s debt.

After the deal is completed, probably next year, Vale will own 81 percent of the Moatize mine and 35 percent of the Nacala corridor, down from its current stakes of 95 percent and 70 percent.

Mozambique discovered billions of tons of coal reserves at the start of the decade. Besides Vale, the Anglo-Australian miners Rio Tinto and Beacon Hill Resources, and India’s Jindal Steel and Power also invested in the country’s coal.

Vale has already spent nearly $4 billion on Moatize and Nacala and forecasts another $2.5 billion in investment, making the twin project the company’s second largest continuing capital expenditure.

But the price of coal is now half what it was when Vale began producing in Mozambique in 2011. This year, Rio Tinto sold its Mozambique coal assets, which it had originally bought in 2011 for $3.7 billion, for $50 million to a consortium of Indian companies.

Falling prices for metals have also hurt Vale, which posted a loss of $1.44 billion on $9.25 billion in revenue in the third quarter.

Vale’s chief executive, Murilo Ferreira, said this month that as part of the company’s plan to raise $5 billion to $10 billion through asset sales in 2015, it might sell a minority stake in its basic metals unit — mostly nickel and copper — through an initial public offering. The company estimates the unit is worth $30 billion to $35 billion.

Murilo Ferreira, chief executive of the Brazilian metals giant Vale
Murilo Ferreira, chief executive of the Brazilian metals giant Vale

Themis Larangeira, an analyst with the Rio de Janeiro investment consulting firm Lopes Filho, said the deal with Mitsui & Company was a way for Vale to increase cash flow and focus more on core operations.

Ms. Larangeira said Vale’s Mozambique investment was troubled from the start because of a lack of transparency and conflicts with Mozambique’s government.

“They don’t break it down, but they certainly lost a lot of money on this,” she said.

Source: dealbook.nytimes.com

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Carlos Monteiro is a Brazilian citizen, graduated in Business Administration by the Catholic University of São Paulo. He lives in Odense, Denmark with his Danish Wife, Cathrine, and their half Danish /Brazilian daughter Ines Marie. You are very welcome to be in contact him at any time.

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