Japan's Mistui & Co. Ltd. has bucked a global slump in coal sector investment by stumping up $763 million to join Brazil's Vale SA in a Mozambique coking coal project.
Mitsui said late Tuesday, Dec. 9, it will acquire a 15% stake in a Vale subsidiary that owns 95% of the Moatize coal mine for $450 million in cash and assumed debt, and will take a 50% stake in the associated transport assets for $313 million.
"The partial sale of the troubled Moatize mine and logistics project appears to be at a very attractive price for Vale," noted BMO Capital Markets analyst Tony Robson.
Metallurgical coal prices slumped to six-year lows in recent weeks amid a slow down in Chinese demand. Falling prices have prompted coalmines to slash about 30% of production, equal to about 10% of the global seaborne trade, St. Louis-based producer Peabody Energy said in September.
Vale will use the cash from Mitsui to fund the expansion of the Moatize mine, and also plans to negotiate a new $2.7 billion non-resource project financing loan for the mine's logistics operations, called the Nacala Logistic Corridor, or NCL, from the strengthened financial footing. The loan would fund about $1.7 billion of capital expenditure needed to complete the logistics project, while $1 billion would be returned to Vale to repay bridging loans from its shareholders.
Vale said that Mitsui's investment and the refinancing will save it a total $3.65 billion in expenditure on Moatize and the logistics operation. Mitsui has incentive to support Vale as it owns a 15% stake in Valepar SA, a holding company that is the controlling shareholder in Vale.