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Vale’s coal business remains in the red in Q2 2014

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World Coal,

Vale’s coal business made a loss of US$154 million in Q2, an improvement on its Q1 loss of US$162 million. Savings of US$26 million from lower costs and expenses helped boost performance, partially offset by lower sales prices.

Revenues from metallurgical coal increased to US$196 million, 94.1% higher than the previous quarter as better performance at Moatize coal mine in Mozambique and a ramp-up of operations at Carborough Downs coal mine after the longwall move in Q1 boosted output. The improved performance was offset by a drop in prices from US114 per tonne to US$108 per tonne.

Revenue from thermal coal in dropped to US$5 million from US$36 million in, mainly due to the lower volumes sold.

Vale continues to invest in its Mozambique coal assets, spending US$150 million in the Moatize II projects and US$395 million in the Nacala logistics corridor through the quarter. Infrastructure remains the limiting factor to greater utilization of the Mozambique resource base and the start of operations on the Nacala corridor by the end of this year should help improve mine productivity.

The greenfield sections of the Nacala corridor in Mozambique and Malawi are in the final stages of construction, as well as the rehabilitation of the existing railroad section. The remaining portions are being revamped as planned until the end of 2016, when the corridor will be fully able to transport 18 million tpa.

Rio Tinto recently sold its Mozambique assets after writing down the value of the business by over US$3 billion on transportation challenges.

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