Vale SA (VALE3), the world’s largest iron-ore producer, agreed to sell its thermal coal assets in Colombia for $407 million to a unit of Goldman Sachs Group Inc. (GS) as it focuses on metal production.
Vale will sell the assets to Goldman’s Colombian Natural Resources SAS in cash, the Rio de Janeiro-based company said in a statement today. The divestiture includes Vale’s El Hatillo coal mine, the Cerro Largo deposit, a port facility on the Atlantic coast of Colombia and an 8.4 percent stake in the railway that links the mines with the port, the company said.
“The sale of the thermal coal operations in Colombia is part of our continuous efforts to optimize the asset portfolio,” Vale said in the statement.
Vale Chief Executive Officer Murilo Ferreira is focusing on returning capital to investors as the company’s profit margins shrink because of lower iron-ore prices. The company exited the kaolin mineral business after announcing May 7 the sale of a 61.5 percent stake in its Cadam SA unit. Vale also hired Bank of Nova Scotia and Citigroup Inc. to sell its oil and natural-gas assets in Brazil, three people familiar with the matter told Bloomberg News earlier this month.
‘Core Value Drivers’
Selling assets including thermal coal mines will allow Vale to concentrate on “its core value drivers,” Barclays Plc analysts led by Leonardo Correa said in a note to clients today.
“In the context of tougher market conditions, the company manages to free up some cash,” to keep debt ratios down, they said.
Vale, which also operates coal mines in Australia and Mozambique, generated about 1.2 percent of its first-quarter revenue from its thermal coal unit and 2.2 percent from metallurgical coal production. Ferrous minerals including iron ore and pellets accounted for about 69 percent of operating revenue.
The company’s priority is increasing production of coal used to make steel instead of coal for power generation, Roger Downey, Vale’s head of fertilizers and coal, told reporters May 18.
“We have world-class, competitive projects that offer us a big growth pipeline” in metallurgical coal, Downey said. “Thermal coal is a bit outside our core business, so we need to see our assets in Colombia through that context.”
The El Hatillo mine produced 848,000 metric tons of thermal coal in the first quarter, 1.6 percent more than the previous year, Vale said April 17 in its production report. Total coal output climbed 65 percent to 2.35 million metric tons during the quarter as the company ramps up the first stage of its flagship Moatize project in Mozambique, it said.
Vale rose 1 percent to close at 36.10 reais in Sao Paulo, the biggest gain in a week. The stock has fallen about 4.5 percent this year, more than the 2.7 percent decline of the Brazilian benchmark Bovespa Index. (IBOV)