Brazilian mining group Vale has assured the markets that Japanese group Mitsui was not seeking a revision of the terms of its deal to buy stakes in its operations in the south- east African country of Mozambique. This was in response to a report in the Brazilian newspaper Valor Economico, which followed the taking of an impairment by Vale on its Mozambique ventures.

In a securities filing last week, Vale stated that the 2015 impairment taken on its Mozambique assets “does not directly impact Mitsui’s invest-ment decision”. The miner quoted a statement on Mitsui’s website: “Vale’s impairment does not directly impact our investment decision; we are currently in negotiations for prompt closing of the transaction, including the conclusion of the project finance.” Further, Vale stated that the Japanese group “continues to support” it in its negotiations with the Nippon Export & Invest-ment Insurance group and the Japan Bank for International Cooperation (both agencies of the Japanese government) to obtain financing for the project. It should, perhaps, be noted that Mitsui is one of the shareholders of Valepar, the holding company that is the majority shareholder in Vale.

For last year, Vale Mozambique took an impair-ment of $2.403-billion, because of the decline in forecast future coal prices and increased logistical costs. These have reduced the estimated net recoverable quantity of coal from the Mozambique assets. The only bigger impairment suffered by Vale was from its Newfoundland, Canada, nickel project, which was written down by $3.46-billion.

In December 2014, the miner agreed to sell 15% of Vale Mozambique to Mitsui for $450-million, plus $30-million in terms of a “earn out” clause. As the deal also includes a “claw-back” clause worth up to $120-million, the actual cost to Mitsui could range from $330-million to $480-million. Vale Mozambique owns 95% of the Moatize mine, in the African country’s Tete province. Vale also agreed to sell half its 70% share in the Nacala Logistics Corridor to Mitsui, meaning that the two companies would share control with 35% each. The conclusion of the deals depends on the fulfilment of certain conditions.

Moatize is Vale’s biggest and most important operation in Africa; phase 2 of the project is currently undergoing commissioning. The Moatize Phase 2 mine and plant expansion will double the operation’s production capacity to 22 Mt/y by adding another 11 Mt/y to the current capacity, and is now, in physical terms, virtually finished. Capital expenditure on Moatize Phase 2 was $196-million during the last quarter of last year. Moatize produced 4.9 Mt last year. This was effectively the same output as in 2014; however, metallurgical coal production increased by 8.9%, while thermal coal production fell by 12.6%, giving the mine an improved product mix.

Because of logistical constraints imposed on Moatize – the mine has yet to reach its Phase 1 full production capacity – by the limitations of the Sena railway from Tete to Beira, Vale has been developing an alternative route, the Nacala logistics corridor. This runs from Tete, through Malawi, back into Mozambique and to the port city of Nacala-a-Velha. It involved the con- struction of new track and the renovation of existing track. By the end of last year, the physi-cal progress on the corridor had reached 97%. As far as the railway was concerned, the entire brownfield section had been upgraded and four thermal coal shipments totalling 523 000 t were run along the line and discharged at Nacala port during January.