Mining firm Vale buys out partner in Mozambique, divests coal assets

MOZAMBIQUE – Global mining company Vale has said it is buying out minority stake partner, Japan’s Mitsui & Co, in a Mozambique coal mine and port project, ahead of selling the loss-making asset as it works to become carbon neutral by 2050.

Vale, the world’s second-biggest iron ore miner, said in a statement it planned to divest its loss-making Moatize coal mine and Nacala Corridor rail and port projects in Mozambique, to focus on its core operations.

Mitsui also said separately it has agreed to sell its stake in the mine and the infrastructure assets to Vale, the project operator, for US$1 each, aiming to complete the transfer by year-end.

“It’s a terribly underperforming asset,” said analyst Mathew Hodge of Morningstar in Sydney told Reuters.

 “Something meaningful needs to change for it to have saleable value.”

Japan’s Mitsui & Co has agreed to sell its stake in the Moatize coal mine and Nacala Corridor rail and port projects in Mozambique to Brazil’s Vale, the operator of the projects, for $1 each”

In 2019, Vale fully impaired the assets due to technical and operational issues and said it would revise its mining plan and overhaul its processing plants, before those plans were disrupted by COVID-19.

Vale’s coal division posted a loss of US$213 million in adjusted earnings before interest, tax, depreciation, and amortisation in its most recent quarterly result.

The operations are expected to resume their ramp-up this year, to reach a production rate of 15 million tonnes a year in the second half and 18 million tonnes a year in 2022, Vale said.

Mitsui too has posted a series of impairment losses, totalling $451 million, on its Mozambique coal and infrastructure assets, taking the book value of its stake in the Moatize mine to zero.

The Nacala transport corridor still has a book value of about US$500 million, including its loans, it said.

Mitsui said it is reviewing an anticipated loss from the sale and any financial impact related to the projects was considered in its October earnings forecast for the current financial year to March 31.

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