Vale Sells $763 Million Stake in Moatize Coal Mine to Mitsui & Co.

Brazilian mining company Vale has agreed to sell a 15 percent stake in its Moatize coal project to Japanese trading house Mitsui & Co. The $450 million deal will also include a 50 percent stake in associated rail and port infrastructure for an additional $313 million.

Located in Mozambique, the Moatize mine is one of the largest coal deposits in the world. Since commencing production earlier this year, coal output has increased by 8.4 percent to 2.14 million tons.

“The partial sale of the troubled Moatize mine and logistics project appears to be at a very attractive price for Vale,” said Tony Robson, an analyst at BMO Capital Markets. “The proposed sale would likely make the company net free cash flow break-even for the year.”

The deal includes a 50 percent stake in the Nacala Logistics Corrdior (NLC) rail and port infrastructure. This critical piece of the acquisition will allow shipments of coal from the Port of Nacala – 912 km east of the mine -- and help increase capacity of rail and port shipments.

“The transaction is essential for the continuity of our investment in Mozambique and Malawi as it provides the funding for the completion of the Moatize project and of the NLC,” Vale said in a separate statement.

According to Reuters Africa, Vale will use the proceeds of the sale to fund the expansion of the mine. Mitsui will also be responsible for its share of future mine investments.

The deal is expected to close in 2015 in which Vale will indirectly own 81 percent of the Moatize coal mine and 35 percent of NLC.