Maputo — Maputo 13 May (AIM) - The Mozambican government has guaranteed that it is carefully following the entire process of the withdrawal from the country of the Brazilian mining giant, Vale.
Vale says it intends to sell off its coal mining operations in the western province of Tete. In preparation for this, Vale reached an agreement in April with its main partner, the Japanese company Mitsui, on the transfer of interests, from the Japanese company to the Brazilian miner, which in turn will sell the entire coal extraction and export project to a new entity.
The transaction with Mitsui was made for the symbolic price of one dollar, but all associated expenses and charges - including an outstanding balance of 2.5 billion dollars - pass to Vale.
Vale announced in January that following the acquisition of Mitsui's stakes and, consequently, following the simplification of the business and asset management, it will begin the process of divestment of its stake in the coal business.
This, it said, will be guided by the preservation of the operational continuity of the Moatize open cast coal mine and the railway line from Moatize through southern Malawi to the northern port of Nacala-a-Velha, through the search for a third party interested in these assets.
Vale employs around 8,000 people, close to 3,000 direct workers and the remainder sub-contracted. Before selling off its assets, Vale is making investments which it hopes will help it resume production, reaching 15 million tonnes of coal in 2021 - after 5.1 million tonnes in 2020.
The Mozambican Minister of Mineral Resources and Energy, Max Tonela, on leaving a round-table on Thursday between Mozambique and the European Union, which shared experiences on questions of regional economic integration, said the government wanted to ensure that there is no break in continuity in coal operations.
"The government has been following this process to ensure that there is no risk to the continuity of coal mining operations in Moatize, or of the Nacala-a-Velha rail corridor", he said.
The negotiations between Vale and Mitsui on transferring the Japanese interests to Vale were now reaching their conclusion, explained Tonela. This would allow Vale to take 100 per cent of the mine and of the railway. "This step should be over in the next few weeks", he said.
Vale has hired some investment banks to advise the company in identifying potential buyers with the technical and financial competence to replace Vale at the head of the two projects.
Asked whether Mozambique will benefit from capital gains tax on Vale's sale of the mine and railway, Tonela said that was a question for the Mozambican Tax Authority (AT). But he thought the possibility of a capital gains tax windfall was remote, since the Moatize mine has fallen sharply in value, due to the decline of coal prices on the world market.
Vale has been operating the mine for the past decade, usually at a heavy loss. Only in two years, 2017 and 2018, did the mine run at a profit.