Last year, for the first time since 2010, Brazilian mining group Vale’s Moatize coal operation, in Mozambique, recorded positive earnings before interest, taxes, depreciation and amortisation (Ebitda). Moatize is now the group’s only coal operation, following the sale of its last Australian coal operation, Carborough Downs, in late 2016. Moatize is run by a Vale subsidiary, Vale Moçambique, which is majority-owned by the Brazilian parent, with Japanese and Mozambican minority shareholders.
“Adjusted Ebitda for the coal shipped through the Nacala port reached $410 million, driving the improvement of the coal business adjusted Ebitda to $330-million in 2017,” stated the mining group in its ‘Vale’s Performance in 2017’ report. The increase of $384 million, compared with the negative $54 million recorded in 2016, was mainly due to higher realised prices ($386-million) and higher sales volumes from Mozambique ($129-million). These higher prices and sales volumes were partially offset by the higher costs and expenses ($73 million), owing to the impact of the logistics tariff applied after the deconsolidation of the Nacala Logistics Corridor, and the lower Ebitda from Australia ($57-million), where operations were discontinued with the sale of Carborough Downs in November 2016.”
(The coal from Moatize is conveyed by rail, through Malawi, along the Nacala Logistics Corridor to the Port of Nacala. Vale originally owned 70% of the Nacala Logistics Corridor but sold half its share to Japan’s Mitsui, so each of the two groups now has 35%; they jointly control it.)
During 2017, Vale obtained an average price of $172.7/t for the metallurgical coal from Moatize and $71/t for the thermal coal. These were significant increases over the $119.5/t and $46.2/t respectively obtained in 2016. Net operating revenue for the metallurgical coal came to $1.24-billion last year, while the figure for thermal coal was $327-million. The 2016 number for metallurgical coal was much lower at $587-million, and for thermal coal, lower at $252-million.
The report also focused the fourth quarter of last year (4Q17). “The adjusted coal business Ebitda in 4Q17 was $66 million, with coal shipped through the Nacala port representing $84-million,” it said. “The business result was $20 million higher than the $46-million recorded in 3Q17, mainly owing to higher realised prices ($68 million), which were partially offset by higher costs and expenses ($46-million).”
Net coal sales revenues were $402-million in 4Q17, up from $360-million in the previous quarter. This was the consequence of a combination of higher prices (which added $68-million to the revenues) and lower sales volumes (which subtracted $26-million from the revenues).
Metallurgical coal sales volumes for the fourth quarter came to 1.715-million tons (Mt). Thermal coal sales amounted to 1.228 Mt. These volumes were both lower than in the third quarter (by 8% and 4% respectively) because of a failure in a hydraulic excavator, which has since been fixed.
“In 4Q17, 77% of the metallurgical coal sales were priced based on a market index, including index lagged prices, 19% were sold based on fixed prices (spot shipments and trail cargoes) and 4% were linked to the quarterly index benchmark,” affirmed Vale. “Eighty-six per cent of thermal coal sales were priced based on index prices, with the remaining 14% based on fixed prices.”
The realised price for metallurgical coal rose by $36.6/t, and the seaborne price index did so by $15.9/t, during the fourth quarter. For thermal coal, the realised price in 4Q17 was 6.4% higher than in 3Q17, reaching $78.6/t.