Vale sells Mozambican coal business to promote non-core divestiture plan

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Brazilian mining giant Vale announced on Tuesday that it had agreed to sell its Moatize coal mine and export railway in Mozambique to Vulcan Minerals, owned by Jindal Group of India, for US $270 million, as well as a 10-year royalty contract.

Vale said in its securities filing that it would receive US $80 million immediately and that the remaining funds would be available when the deal was completed, which still needs to be approved by the Mozambican government.

Over the past decade, Vale has suffered a setback on its Moatize coal mine project and failed to increase production as planned. Earlier this year, Vale announced that it would withdraw from the coal industry altogether in the future, aiming to focus on its core business and reduce its carbon footprint.

In the view of BTG Pactual analysts, the deal marks the resolution of another problem for Vale, who reiterated their "buy" rating on the company's shares in their research report.

Daniel Sasson, an analyst at Ita ú BBA, said the move made strategic sense and Vale had made clear its intention to divest its coal assets in line with its efforts to improve ESG practices (and ratings) over the past few years.

Vale, once the world's largest iron ore producer, ceded the title to Rio Tinto after the collapse of the Bloomatio dam in 2019.

At its annual investor day last month, Vale said it would continue to divest non-core assets, such as fertiliser producer Mosaic Co., worth $1.3 billion. Shares, as well as coal, bauxite and steel businesses, thus focusing on iron ore, nickel and copper.