Vale looking to raise $10B through Chinese streaming deal

Vale (NYSE:VALE) is getting more creative in its debt-reduction plans, by bolstering cash flow through a metal streaming deal with Chinese companies.

The revelation by Reuters on Wednesday came via un-named sources, who say that under terms of the arrangement, Vale would sell part of its future output to the Chinese over 30 years.

Hit by its deepest quarterly loss ever, and slumping iron ore prices, the Rio de Janeiro-based company said in February it wants to reduce its net debt to $15 billion within 18 months and would look at selling core assets to do it. The Samarco dam collapse in November last year, which killed 19 people and became Brazil’s worst environmental disaster, also forced Vale to book a write-down of $132 million in unpaid dividends and royalties.

Among the candidates for divestiture is Vale's fertilizer business. U.S.-based Mosaic Co. (NYSE:MOS), the world’s largest producer of phosphate fertilizer, is said to be in talks with Vale to acquire the Brazilian mining giant’s fertilizer unit, in a deal worth about $3 billion.

The world's biggest iron ore producer already has an agreement with Silver Wheaton (NYSE, TSX:SLW) regarding its Salobo copper mine in Brazil. On Tuesday Vale and Silver Wheaton tweaked the deal, so that the portion sold to Silver Wheaton rises to 75 percent from 50 percent. Vale will receive an upfront payment of $800 million.

Iron ore prices slumped again on Friday to below US$60 a tonne, despite breaking through $60 resistance on July 28 on the back of strong Chinese steel prices, and expectations of an investigation into dumping by Brazilian and Australian iron producers of product into China.