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Vale set to sell 25% stake in coal operations

World Coal,

Brazilian mining company Vale has announced plans to sell a 15 – 25% stake in its coal operations, according to Reuters. The planned sale would include coal operations in Australia and Mozambique, with the company saying that it had already received interest from a number of potential partners, including coal buyers.

In early December, Vale announced it would reduce expenditures and capital costs for a third year in a row, after a peak of US$ 18 billion in 2011.

Murilo Ferreira, Vale CEO, said the company would only deploy capital in “world-class assets with large reserves, low costs, high quality products and opportunities for low-cost brownfield expansions.”

Coal accounts for 2.3% of Vale’s total revenue, with the miner holding the position as the world’s largest exporter of iron ore. The company said that it hoped the partnership in coal, along with the sale of a stake in its Mozambican rail link and in fertiliser assets, can bring funding, cut capital commitment and help mitigate risk.

Analysts have estimated a net asset value of Vale’s coal operations of roughly US$ 4 billion, with most of this value in Moatize in Mozambique – which is one of the largest metallurgical coal mines in the world.

Roger Downey, head of Vale’s fertilisers and coal division, said: “The assets in Australia and Moatize will go in a coal vehicle. We are looking to sell a stake of between 15 to 25%, but we are flexible, depending on the proposal.”

In Australia, Vale owns a majority stake in the underground Carborough Downs mine, along with a 50% stake in Isaac Plains – a joint venture with Sumitomo – and a 62% stake in the Integra mine in New South Wales’ Hunter Valley. The company also owns as yet undeveloped coal projects including the Belvedere project in Queensland.

Vale produced over 5 million t of metallurgical coal and almost 2 million t of thermal coal in 2012.

Rail and port stake

Vale said it was also looking to sell a minority slice of its stake in a group that is expanding a rail and port corridor to move coal from Moatize to the port of Nacala, hoping to cut back a US$ 4.4 billion investment bill.

The miner said that, because the railway is important to non-coal operations like agriculture, it would look for partners outside the coal industry for the rail link.

Specialisation: not diversification 

Under its previous boss, Vale had looked to diversify its mining assets to compete with other mining giants including Rio Tinto and BHP Billiton. However, the company is now looking to refocus efforts on iron ore, which is its main business.

“Diversification at any cost, to boost volumes and to be the number one miner is not our aim,” Ferreira said. “We want to be bigger in world class projects, without caring if we are number one, two or three.”

Edited from various sources by Sam Dodson

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