Brazil's Vale sells coal assets to Jindal's Vulcan Minerals for $270 mn

Brazilian mining company Vale has entered into a binding agreement with Jindal’s Vulcan Minerals to sell the Moatize coalmine (Mozambique) and the Nacala Logistics Corridor (straddling Mozambique and Malawi) at $270 million.

Vulcan is a private company and part of $18-billion Naveen Jindal Group. The deal comprises $80 million, which Vale will receive immediately, followed by the balance $190 million at the close of the transaction.

“I am pleased to announce this important step for the responsible divestment of Moatize and NLC (Nacala Logistics Corridor), in a transaction that benefits the communities and governments where those operations are located and offering a sustainable future for the operations. This is another accomplishment on our commitment to reshape our company, focusing on our core businesses,” the release quoted Eduardo Bartolomeo, chief executive officer of Vale, as saying.

Alongside, there will also be a 10-year royalty agreement subject to certain conditions in mine production and coal prices. “The closing of the deal is expected to take time because many approvals are needed from local authorities,” said an industry source close to the development.

The transaction is subject to the approval of the Ministry of Mineral Resources and Energy of Mozambique, Vale said in its release.

KEY TAKEAWAYS

• Moatize mine has thermal, metallurgical coal 
• Deal includes 10-year Royalty Agreement 
• Mine buy will make Jindal Steel significantly self reliant in coal sourcing 
• Jindal Steel currently relies on Australia for 60% of its coal requirement

The Moatize coalmine is one of the world’s biggest metallurgical and thermal coalmine sites and will help Jindal Steel become self-reliant in its coal supplies for its domestic steel operations. Metallurgical coal is used in making steel.

Currently, Jindal Steel sources nearly 60 per cent of its coking coal from Australia, some of its thermal coal comes from Mozambique, and the rest of the coking coal from the open market. There are, however, no details regarding funding arrangements. Calls made to Jindal Steel went unanswered.

In April 2021, Jindal Steel & Power (Mauritius), an arm of Naveen Jindal-led Jindal Steel & Power (JSPL), sold its balance stake in an Oman unit to Vulcan Steel. Jindal Steel owned 48.99 percent in the unit via Jindal Steel & Power (Mauritius). The former had made the deal to exit the Oman business in September 2020.

Vale said it was committed to working with both the Mozambique and Malawi governments to ensure a smooth transition to the new operator. In early 2021, Vale announced it would no longer own coal assets, and focus on its core businesses and on becoming a leader in low-carbon mining.

Over the past 15 years, Vale has worked in partnership with the Mozambique and Malawi governments in working the Moatize mine and NLC’s 912-km railway for coal transportation, in addition to the revamp of general cargo operations and passenger transportation.