Vale struggles to sell part of Mozambique interest

Post was last updated: January 14, 2016

Iron-ore producer Vale says it is struggling to conclude the sale of its Mozambique-based coal assets which comprise Moatize and the Nacala logistics corridor passing through Malawi.

The company has since drawn down US$3 billion from its US$5 billion revolving credit facility with international financial institutions to increase liquidity and bridge potential cash flow needs until the conclusion of its divestment programme, the company advised on Tuesday.

Canada’s Mining Weekly online publication reported on Wednesday that Vale agreed to sell 15 percent of its local subsidiary, Vale Mozambique to Mitsui of Japan which, at conclusion, would have seen Vale holding 81 percent of Vale Mozambique, having originally owned 95 percent. Five percent is held by local shareholders.

According to Mining Weekly, some of the amount the planned divesture sales was to generate was to be used to repay bonds due this month.

Vale also stated that it was working on long-term debt transactions to reduce the use of the revolving credit lines while the divestment programme was carried out.

“These transactions were expected to preserve Vale’s average cost of debt,” according to Mining Weekly.

The Nacala corridor project, located in northern Mozambique and southern Malawi, was implemented to provide logistical support for the Moatize coal project in Mozambique.

The project involved the construction and rehabilitation of the 912 km railway through Mozambique and Malawi, and the construction of a new coal terminal in Nacala-a-Velha port.

The total construction cost was estimated at US$4.4-billion, with part of the cost to be funded with project finance from public financial institutions overseas and Japanese banks.

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