Vale sells stake in African coal operations for about $950 million

December 11, 2014

Mitsui & Co., a Japanese trading company, bought a stake in Vale's African coal operations in a deal reported to be worth about $950 million, The New York Times reported.

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.

When the deal closes, expected to be 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.

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.

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