Vale has agreed to new terms for the sale of stakes in a coal mine and railway project in Mozambique to shareholder Mitsui & Co, in a deal that will raise $768-million and could help Vale free up to $2.7-billion in funding commitments for both projects.
The sale of Vale’s stakes in the Moatize coal mine and the Nacala Corridor railway and port hinge on the approval of a project finance plan, Rio de Janeiro-based Vale said in a statement. The deal reworks terms of a prior accord over the mine and the infrastructure project.
It is a further step in attempts by Vale CEO Murilo Ferreira to reduce the Brazilian miner’s capital spending burden and cut debt by $10-billion through asset sales over the next couple of years.
The Moatize and Nacala transactions should help reduce Vale’s fundraising needs in coming years as the world’s No 1 iron-ore producer adjusts to an era of lower commodities prices.
The deal with Mitsui was first struck in December 2014 but had not closed due to challenges in securing long-term financing for the project, which is one of Africa’s biggest with an estimated total cost of $4.4-billion. Vale has already poured about $2-billion into it.
“We have concluded the reworking of these terms at a moment when the market for coal is beginning to gain some momentum,” Ferreira said in a video posted on Vale’s website.
Common American depositary receipts of Vale recouped part of their earlier losses following the news. The stock fell 1.9% to $5.5450 at 3:45 pm New York time, after falling as much as 2.9% earlier.
Under the new terms, Mitsui will contribute up to $450-million for 15% of Vale’s 95% stake in the mine. Of this, $255-million is guaranteed while the remaining $195 million is dependent on attaining unspecified performance goals.
Mitsui will also contribute $348-million for 50% of Vale’s 70% stake in the Nacala Corridor, through a mix of equity and so-called hybrid instruments, which often combine features of equity and debt securities.
Mitsui will also provide the Nacala Corridor project with $165-million in a long-term loan.
Mitsui & Co for the sale of a stake in its Moatize coal mine and connected railway, in Mozambique.
Under the new terms, Mitsui will contribute up to $450-million for a 15% stake in the mine and $348-million for a 50% stake in assets related to the Nacala Corridor, a railway and port connected to the mine.