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Released December 15, 2014 | JOHANNESBURG
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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Mitsui (OTC:MITSY) (Tokyo, Japan) will participate in Vale S.A.'s (NYSE:VALE) (Rio de Janeiro, Brazil) Moatize coal mine project and Nacala Logistics Corridor infrastructure project, under an agreement reached by the two companies.
Mitsui will own a 15% equity stake in Vale's investment subsidiary, which holds a 95% interest in the Moatize project. Mitsui also will own a 50% equity interest in Vale's investment subsidiaries that have been promoting the Nacala project. Mitsui's upfront payment for investment and loans is $450 million for the mine and $313 for the infrastructure. The amount for the mine will be adjusted based on the future performance results of the Moatize project, which means that the final payments could vary according to contact conditions.
The transaction will be completed in 2015, when approvals and licenses have been obtained, including those given by local governments. Vale will own 81% of the mine indirectly, and about 35% of the Nacala Logistics Corridor.
The mine is one of the largest and most cost competitive in the world. It holds a coal reserve of 690 million tonnes of metallurgical and thermal coal. Coal seams are near the surface, which allows for large-scale, open-cut operation.
Vale began production at the mine in August 2011, and exports coal via Sena railway from the port of Beira, which is about 600 kilometers from the mine.
In 2013, the annual production was 3.8 million tonnes. Vale plans to increase annual production to 22 million tonnes by 2016. The expansion is expected to cost about $2.1 billion, part of which Vale already has paid. Mitsui's future payment for the expansion is expected to be $190 million on a pro rata basis.
Expanded production will exceed the Sena rail and port capacity, which is driving the plan to construct new infrastructure in the Nacala Logistics Corridor to enable shipments from the port of Nacala, located 912 kilometers east of the mine.
The integrated Moatize-Nacala project covers the development of the transportation and port infrastructure, which is essential for the coal operations from mining development to the shipments of coal.
The Nacala project requires the upgrade of 682 kilometers of existing rail line, which runs across Mozambique and Malawi, and the construction of 230 kilometers of new rail line. It includes the construction of a new coal terminal in the port and the development of general commodities terminals. Rail transport capacity is planned to increase gradually up to 22 million tonnes. The port's coal shipping capacity will be 18 million tonnes annually, and general commodities capacity will be 4 million tonnes.
The total construction cost will be about $4.4 billion, part of which will be funded from public financial institutions and Japanese banks.
Moatize is the first mine that Mitsui has participated in since 2004. It is a resource asset that will enhance the company's coal business revenue base.
For related information, see March 18, 2014, article - Vale's Massive Mozambique Coal Mine to Take 250 Megawatts from Moatize Power Project, April 14, 2014, article - Mozambique's Rail and Port Network Expansion Aims to Unlock Coal Export Potential, and May 29, 2014, article - Vale Posts $44 Million Loss in Mozambique for First Quarter 2014 after Plunge in Coal Prices.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
Mitsui will own a 15% equity stake in Vale's investment subsidiary, which holds a 95% interest in the Moatize project. Mitsui also will own a 50% equity interest in Vale's investment subsidiaries that have been promoting the Nacala project. Mitsui's upfront payment for investment and loans is $450 million for the mine and $313 for the infrastructure. The amount for the mine will be adjusted based on the future performance results of the Moatize project, which means that the final payments could vary according to contact conditions.
The transaction will be completed in 2015, when approvals and licenses have been obtained, including those given by local governments. Vale will own 81% of the mine indirectly, and about 35% of the Nacala Logistics Corridor.
The mine is one of the largest and most cost competitive in the world. It holds a coal reserve of 690 million tonnes of metallurgical and thermal coal. Coal seams are near the surface, which allows for large-scale, open-cut operation.
Vale began production at the mine in August 2011, and exports coal via Sena railway from the port of Beira, which is about 600 kilometers from the mine.
In 2013, the annual production was 3.8 million tonnes. Vale plans to increase annual production to 22 million tonnes by 2016. The expansion is expected to cost about $2.1 billion, part of which Vale already has paid. Mitsui's future payment for the expansion is expected to be $190 million on a pro rata basis.
Expanded production will exceed the Sena rail and port capacity, which is driving the plan to construct new infrastructure in the Nacala Logistics Corridor to enable shipments from the port of Nacala, located 912 kilometers east of the mine.
The integrated Moatize-Nacala project covers the development of the transportation and port infrastructure, which is essential for the coal operations from mining development to the shipments of coal.
The Nacala project requires the upgrade of 682 kilometers of existing rail line, which runs across Mozambique and Malawi, and the construction of 230 kilometers of new rail line. It includes the construction of a new coal terminal in the port and the development of general commodities terminals. Rail transport capacity is planned to increase gradually up to 22 million tonnes. The port's coal shipping capacity will be 18 million tonnes annually, and general commodities capacity will be 4 million tonnes.
The total construction cost will be about $4.4 billion, part of which will be funded from public financial institutions and Japanese banks.
Moatize is the first mine that Mitsui has participated in since 2004. It is a resource asset that will enhance the company's coal business revenue base.
For related information, see March 18, 2014, article - Vale's Massive Mozambique Coal Mine to Take 250 Megawatts from Moatize Power Project, April 14, 2014, article - Mozambique's Rail and Port Network Expansion Aims to Unlock Coal Export Potential, and May 29, 2014, article - Vale Posts $44 Million Loss in Mozambique for First Quarter 2014 after Plunge in Coal Prices.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
