Vale to Acquire Stake in Moatize & NLC to Exit Coal Business
Vale has signed a Heads of Agreement with Mitsui, allowing both parties to structure Mitsui's exit from the Moatize coal mine and the Nacala Logistics Corridor, as a first step towards Vale's divestment of the coal business. The transaction is in line with the Company's 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. The agreement establishes the main terms for the acquisition by Vale of the totality of Mitsui's stakes of 15% in the Moatize mine together with 50% in the equity and all other minority credits Mitsui holds on NLC. The parties' objective is that Mitsui's exit can be completed throughout 2021, which is subject to the execution of the definitive agreement and usual conditions precedent in this sort of transaction.
The HoA determines that Vale will acquire Mitsui's stake in the mine and logistics assets for USD 1 each. Upon closing of the transaction, Vale will consolidate NCL entities and, therefore, all of their assets and liabilities, including the Nacala project finance, which has approximately USD 2.5 billion outstanding balance. Consolidation of the Project Finance will imply that approximately USD 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. Future refinancing of the Project Finance and simplification of the structure will lead to potential annual savings of approximately USD 25 million.
Following the acquisition of Mitsui's stakes and, hence, the governance and asset management simplification, Vale will begin the process of divesting its participation in the coal business, which will be guided by the preservation of the operational continuity of the Moatize mine and the NLC, through the search for a third party interested in those assets.
Vale 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, as an outcome of investments made in the last 3 years in an intense drilling campaign, aiming a better knowledge of resources and reserves. The two processing plants will be revitalized and adapted to a new flowsheet, which has been under implementation since November 2020. Once fully executed, Vale expects to resume the ramp-up, reaching a production rate of 15 million tonnes per year in 2H21 and 18 15 million tonnes per year in 2022.