Vale expected to give asset sales nod on Thursday

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Tuesday, September 27, 2016

The board of Brazilian mining giant Vale is expected to analyze two major asset sales during a meeting on Thursday, paper Valor Econômico reported.

One is the proposed sale of part of Vale's coal and logistics operations in Mozambique (pictured) to Japan's Mitsui, which analysts believe could bring in about US$3bn in cash and financing from banks.

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Furthermore, the possible sale of its fertilizer unit, Vale Fertilizantes, to Minnesota-based Mosaic in a US$3bn deal is expected to be discussed by Vale's board.

FERTILIZERS

Mosaic has been rumoured to be interested in Vale's fertilizer unit since June. At that time, three sources told Reuters that a cash-and-stock deal was seen as the best option.

The cash-and-stock option would give Vale a 12-15% stake in Mosaic, one of the sources reportedly said.

Vale currently produces fertilizer inputs in Brazil and Peru. The company is also developing projects in Canada and Mozambique.

On Monday, BNamericas released an overview of Vale's fertilizer assets including the Río Colorado project in Argentina.

COAL

In Mozambique's case, delays in obtaining regulatory approvals from local authorities and from neighboring Malawi led to Vale missing sale deadlines.

The miner obtained Mozambique's approval in June, but talks with Malawi are still pending, the report said.

Under the original deal, first announced in 2014, Mitsui would provide about US$1bn to acquire 15% of Vale's stake in the Moatize coal mine and 50% of Vale's 70% equity stake in the Nacala logistics corridor, which has a railroad and a port.

But the deal's terms will have changed after Vale's US$2.4bn write-down of assets in the African country last year.

About two thirds of Moatize's output is metallurgical coal for the steel industry, while the rest is thermal coal for use in power generation. The deposit has proven and probable reserves of 1.09Bt.

Vale Mozambique expects coal shipments to reach 22Mt/y in 2017, with 4Mt to be sent from the port of Beira and 18Mt from Nacala.

In the last few years, Vale has been selling non-core assets, putting projects on hold and focusing on its more profitable iron ore units in a bid to boost profit margins and regain investor confidence.