Brazil’s Vale is selling troubled coal reserves in Mozambique


TOKYO (Reuters) – Brazil’s Vale announced Thursday that it is buying up a minority stake partner, Japan’s Mitsui & Co, in a coal mine and port project in Mozambique before selling the loss-making asset to go climate neutral by 2050.

FILE PHOTO: The logo of the Japanese trading company Mitsui & Co. can be seen in Tokyo, Japan on January 10, 2018. REUTERS / Toru Hanai

Vale, the world’s second largest iron ore mining company, said in a statement it plans to divest its loss-making Moatize coal mine and Mozambique’s Nacala Corridor rail and port projects to focus on its core activities.

Mitsui said separately on Thursday that it had agreed to sell its stake in the mine and infrastructure to Vale, the project operator, for $ 1 each in order to complete the transfer by year-end.

“It’s an asset that has underperformed terribly,” said Morningstar analyst Mathew Hodge in Sydney. “Something meaningful has to change in order for it to be salable.”

In 2019, Vale fully depreciated assets due to technical and operational issues and announced that it would revise its mining plan and overhaul its processing facilities before COVID-19 disrupts those plans.

Vale’s coal division posted a loss of $ 213 million in adjusted earnings before interest, taxes, depreciation and amortization in its most recent quarterly results.

Operations are expected to resume ramp-up this year, reaching a production rate of 15 million tons per year in the second half and 18 million tons per year in 2022, Vale said.

Mitsui has made a series of impairments on its coal and infrastructure assets in Mozambique totaling 46.7 billion yen ($ 451 million), bringing the book value of its stake in the Moatize Mine to zero. The Nacala transportation corridor still has a book value of about $ 500 million, including its loans, it said.

Mitsui said it was considering an expected loss on the sale. All financial implications related to the projects were included in its October profit forecast for the current fiscal year ended March 31, it said.

($ 1 = 103,5500 yen)

Reporting by Yuka Obayashi; Additional coverage from Melanie Burton in Melbourne; Arrangement by Richard Pullin


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