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Mitsui pays US$763 million for stakes in Vale’s Mozambique coal assets

World Coal,

Japan’s second-largest trading house, Mitsui & Co., has agreed to pay US$763 million for stakes in mining giant Vale’s Mozambique coal assets.

The Japanese trader will take a 15% stake in the Moatize coal mine for US$450 million and, for a further US$313 million, will take a 50% stake in Vale’s investment units, which have been promoting the Nacala Corridor rail and port infrastructure project.

The investment signals confidence from Mitsui that there will soon be a recovery in metallurgical coal prices.

Metallurgical coal prices have fallen 18% this year, though they have stabilised in recent months, according to Bloomberg Intelligence analyst Andrew Cosgrove.

Vale’s Moatize mine is one of the world’s biggest deposits of coal used for steelmaking. It has a vast coal reserve of 690 million t and its coal seams are relatively near the surface, which enables large-scale opencast operation.

Vale currently exports coal via the Sena railway from the Port of Beira, which is about 600 km south of the mine. Production from the mine in 2013 was 3.8 million t. In a statement, the mining giant confirmed it had entered into an investment agreement with Mitsui, and said “the transaction amounts will be used to fund the Capex of the Moatize mine expansion.”

The expansion and development of the Nacala project would allow shipments of coal from the Port of Nacala – 912 km east of the mine. The Nacala project would help increase capacity of rail and port shipments, since the Sena railway does not have the current capacity to cope with increased production from Moatize.

In a statement, Mitsui said that it “regards Mozambique as a corporate priority region, because of its potential growth as one of Africa’s leading resource-production nations.”

Vale said the transaction was “essential for the continuity of our investment in Mozambique and Malawi, as it provides the funding for the completion of the Moatize [and Nacala] projects.”

The total amount Mitsui will pay will be adjusted based on future actual performance results of the Moatize project, so the final payment amounts could vary, based on the conditions of the contracts.

According to a statement released by Mitsui, the completion of the contract is subject to satisfaction of certain conditions, such as obtaining the relevant approvals and licenses, including those given by local governments.

Edited from various sources by Sam Dodson

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