Vale sells stake in Mozambique coal project to Mitsui for $763m

Vale sells stake in Mozambique coal project to Mitsui for $763m

Truck transports coal in the Moatize mine. Credit: Marcelo Coelho/ Vale.

As anticipated last week, Vale (NYSE:VALE) has inked a deal with Japan’s second-largest trading house, Mitsui & Co., which will acquire a 15% stake in the Brazilian miner’s Moatize coal project in Mozambique.

The Japanese trader will take a 15% stake in the Moatize coal mine for US$450 million, it said in a statement. For a further US$313 million, Mitsui will acquire a 50% stake in Vale’s investment units, which have been promoting the Nacala Corridor rail and port infrastructure project.

Vale said in a separate statement the transaction was “essential” for the continuity of its operations in Mozambique and Malawi, as it provides the funding needed to complete both the Moatize project and the Nacala Logistic Corridor (NLC).

Moatize mine is one of the world’s largest deposits of coal used for making steel and the company has boosted output for the product by 8.4% to 2.14 million tons in the first nine months of the year.

The expansion and development of the Nacala project would allow shipments of coal from the Port of Nacala – 912 km east of the mine. The Nacala project would help increase capacity of rail and port shipments, since the Sena railway does not have the current capacity to cope with increased production from Moatize.

After the deal is concluded in 2015, Vale will indirectly own 81% of the coal mine and about 35% of NLC, sharing its control with Mitsui, the Brazilian company said, adding that Mitsui may pay a further $30 million for the mining stake conditional of performance targets.

Vale’s boss Murilo Ferreira, said last week he hopes to raise $5 billion to $10 billion through asset sales in 2015. As part of that plan, the miner said it might sell a minority stake in its basic metals unit — mostly nickel and copper — through an initial public offering.