Mitsui clinches Mozambique deal with Vale

BRAZILIAN mining giant Vale has entered into an investment agreement with Mitsui that will give the Japanese trading group a 15% stake in Vale’s Mozambican company – the owner of 95% of the Moatize mine – and 50% of Vale's 70% equity stake in the Nacala Logistic Corridor in Mozambique.
Mitsui clinches Mozambique deal with Vale Mitsui clinches Mozambique deal with Vale Mitsui clinches Mozambique deal with Vale Mitsui clinches Mozambique deal with Vale Mitsui clinches Mozambique deal with Vale

Vale's Moatize mine in Mozambique

Lou Caruana

On completion of the transaction, Vale will indirectly own 81% of the Moatize mine and about 35% of the NLC, sharing its control with Mitsui.

The value attributed to Mitsui's 15% stake in Vale Mozambique is $US450 million. In addition, Mitsui may pay a further $30 million as per an earn-out clause.

A claw-back clause worth up to $120 million is embedded in the $450 million. Both the earn-out and the clawback values are conditioned to yield and production targets agreed upon by Vale and Mitsui.

As a result of these clauses, the final value attributed to Vale Mozambique’s 15% stake could range from $330 to $480 million.

The transaction amounts will be used to fund the Capex of the Moatize mine expansion.

Mitsui will be responsible for funding future capex to complete the Moatize mine expansion, pro-rata to its equity participation of 15% and estimated at an additional $188 million. This value includes 15% of the capex associated with rolling stock, whose funding responsibility is of Vale Mozambique.

The executed capex of the total investment in the Nacala corridor of $4 billion is comprised of equity and debt in the form of Vale's bridge shareholder loans.

Up to the end of 2Q14, the executed capex of $1.9 billion was funded by Vale through $313 million of equity and quasi-equity instruments, with the remaining balance funded through Vale's bridge shareholder loans.

Upon completion of the transaction, Mitsui will contribute $US313 million in equity and quasi-equity instruments and will therefore hold 50% of these instruments, sharing control of the corridor with Vale. Until that time, Vale will continue to fund the NLC with shareholder loans.

Vale and Mitsui are in negotiations for non-recourse project finance to fund the remaining capital expenditures and to take-out part of Vale’s bridge shareholder loans.

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