Vale Takes First Step Toward Exiting Coal Business

Vale has signed an agreement with Mitsui to purchase its stake in the Moatize coal mine and the Nacala Logistics Corridor (NLC). This is the first step toward Vale’s divestment of the coal business. Vale plans to focus on its core businesses and ESG agenda, committed to becoming carbon neutral by 2050 and reducing 33% of its scopes 1 and 2 emissions by 2030.

Vale will acquire Mitsui’s stakes of 15% in the Moatize mine together with 50% in the equity and all other minority credits Mitsui holds on NLC for $1 each. Mitsui’s exit should be completed during 2021.

Upon closing of the transaction, Vale will consolidate NCL entities and all of their assets and liabilities, including the Nacala project finance, which has approximately US$2.5 billion outstanding balance. In doing so, approximately US$300 million per year in operating expenses at the Moatize mine, associated with the Nacala Corridor tariff and which currently impact the Coal Business EBITDA, will be reclassified to financial expenses, debt amortization, sustaining capital and others, with an equivalent increase in the Coal Business EBITDA, according to Vale.

Future refinancing and simplification of the structure will lead to potential annual savings of approximately US$25 million, the company added.

Following the acquisition, Vale will begin the process of divesting its participation in the coal business and search for a third party interested in those assets.

Vale said it has been implementing two initiatives that are expected to produce sustainable results at the Moatize mine: a new mining plan and a new operational strategy for the coal processing plants.

The new mining plan prioritizes ore bodies of better quality and has a better stripping ratio, which is expected to result in a better product mix and cost reduction, according to the company.

The two processing plants will be revitalized and adapted to a new flowsheet, which has been under implementation since November. Once fully executed, Vale expects to resume the ramp-up, reaching a production rate of 15 million metric tons per year (mtpy) in the second half of 2021 and 18 million mtpy in 2022.