Vale, advancing the strip coal business plan to become carbon neutral by 2050

January 20, 2021 -- Vale informed the Company that it today signed an intention agreement with Mitsui & Co. (" Mitsui ") for an orderly exit of Mitsui from the Moatize Coal Mine and the Nacala Logistics Corridor as the first step towards divestment of Vale's coal business. The deal is in line with Vale's strategy to focus on its core business and is in line with the company's environmental, social and governance (ESG) agenda of reducing Range 1 and 2 emissions by 33 per cent by 2030 and becoming carbon neutral by 2050.

Intention agreement

The agreement sets out the main terms of Vale's acquisition of Mitsui's 15 per cent stake in the Moatize coal mine, its 50 per cent stake in the Nacala logistics corridor and all its other minority credits. The parties' objective is to close the acquisition in 2021, subject to the determination of a definitive agreement and the fulfillment of conditions prior to the acquisition.

Under the tentative agreement, Vale will pay $1.00 (US $1) per share for Mitsui's stake in the Moatize coal mine and the Nacala logistics corridor. Upon completion of the transaction, Vale will consolidate the Nacala Logistics Corridor entity and all the assets and liabilities it owns, including the Nacala financing project, which has an outstanding balance of approximately $2.5 billion. Integration project financing means, moire ze coal mine about $300 million a year and nacala logistics corridor of taxes and fees related costs (impact coal business income tax, depreciation and amortisation) will be reclassified to sustainable financial cost, amortization of debt and capital and other categories, coal business income tax, depreciation and amortisation will also increase accordingly. The future refinancing of the Nacala financing project and simplification of the structure following the completion of the acquisition are expected to result in savings of $25 million per annum.

After acquiring the Mitsui stake and streamlining its governance structure and asset management processes, Vale will begin the divestment of the coal business by seeking third parties interested in the Moatize coal mine and the Nacala logistics corridor while maintaining operations.

Operational Improvement Initiatives

Two of Vale's ongoing initiatives at the Moatize mine will deliver sustainability results, including a new mining plan and a new operational strategy for the coal concentrator.

The new plan calls for prioritizing ore bodies with better quality and higher stripping ratios in order to improve product mix quality while reducing costs. To that end, the company has invested in intensive drilling activities over the past three years to better understand coal resources and reserves.

The two existing concentrators at the Moatize coal mine will restart operations under a new process that will be in place from November 2020. With full implementation of the new process, Vale expects the concentrator to continue to operate at a capacity of 15 MMtpy in the second half of 2021 and 18 MMtpy in 2022.

Divestiture process

Over the past 15 years, Vale has worked with the Mozambican and Malawi governments to develop the Moatize coal mine and the 912km Nacala logistics corridor to service coal transport, while revitalising general freight and passenger services. These investments have boosted local economies and left valuable assets for Mozambique and Malawi.

In line with the strategic pillar of the company's "New Social Contract", Vale will continue to support projects and meet all of its commitments to society and stakeholders, including its commitment to workers' rights and resettlement obligations, while responsibly seeking investors for its coal business.

The agreement, the first step towards divesting Vale's coal business, is consistent with the company's capital allocation principles and its goal of simplifying its product portfolio, reinforces the company's commitment to the Paris Agreement and reaffirms its ambition to be a leader in the low-carbon mining sector.