Vale confirms reduced Moz production forecast for 2018 as bad weather takes toll

18th May 2018 By: Rebecca Campbell - Creamer Media Senior Deputy Editor

Vale Mozambique, the predominantly (but not wholly) owned subsidiary of Brazilian mining group Vale, still has to consolidate its coal- producing process at its Moatize mine, in Mozambique’s Tete province, to be able to achieve its full export capacity. This was stated by Vale Mozambique CEO Mário Godoy at a recent press conference in the Mozambique capital of Maputo. Full export capacity, using the railway and coal terminal owned and operated by the Nacala Logistics Corridor company (in which Vale now has a 35% shareholding) is 18-million tons/year (Mt/y).

The Moatize operation now comprises two openpits, Moatize I and Moatize II, supported by two coal handling and processing plants (CHPPs) – CHPP I and CHPP II. The mine produces both metallurgical and thermal coal, with the metallurgical coal being its primary product.

Godoy reaffirmed what the Vale Group in Brazil had already reported: bad weather in the centre and north of the country had disrupted production at Moatize, resulting in the mine’s production forecast for this year being reduced from 16 Mt to 15 Mt. “At the start of the year, we had a prediction of 16-million tons, but, in the meantime, intense rainstorms happened in the regions of both Nampula and Nacala, as well as in Tete, which greatly impaired our activities,” he said.

He reported that Moatize had produced 11.2 Mt of coal last year, up from 5.6 Mt in 2016. The jump in output was due to the increase in production as a result of the ramp-up of Moatize II.

Vale Mozambique’s FD, Marcelo Tertuliano, explained that the company’s much- improved financial performance was principally due to the increased coal prices on the international markets. This was, in turn, driven by stricter inspections of, and restrictions on, coal mines in China, and by increased steel production. Vale Group’s ‘Vale’s Performance in 2017’ report had already announced that Moatize’s 2017 earnings before interest, taxes, depreciation and amortisation (Ebitda) were positive for the first time since 2010.

Ebitda in 2017 had come to $330-million, a dramatic increase of $384-million over the 2016 Ebitda of negative $54-million. The O País newspaper converted Vale Mozambique’s ‘operational result’ into Mozambique currency – 5.7-billion meticais. However, the newspaper noted that the company’s ‘positive’ results did not result in returns sufficient to cover its debt.

A few weeks ago, in its production report for the first quarter of this year, Vale Group assured that it was maintaining its guidance that Moatize would reach a production rate of 18 Mt the following year. Moatize is now the only coal operation owned by the group.

Separately, a Mozambique nongovernmental alliance, the Civil Society Platform on Natural Resources and the Extractive Industry, has averred that government revenues from the extractive industries (mining and oil and gas) were not benefiting the communities that lived in the areas of these mining and hydrocarbons operations. This is despite the fact that the government had established norms to be followed when implementing development projects funded by revenues from the extractive industries.