23 May 2014

Mozambique: Large Losses for Vale-Mozambique

Maputo — Vale-Mozambique, the Mozambican subsidiary of the Brazilian mining giant Vale, made an operational loss of over 44 million US dollars in the first quarter of this year, the new chairperson of the company, Pedro Gutemberg told a Maputo press conference on Friday.

The main reason for the losses is certainly the fall in coal prices on the world market. The price in coking coal was almost 350 US dollars a tonne in 2011, but today it has fallen to below 100 US dollars a tonne - and to move a tonne of coal from Vale's mine at Moatize, in the western Mozambican province of Tete, to the port of Beira, currently costs 66 dollars.

During the first quarter, Gutemberg said Vale mined at Moatize slightly more than a million tonnes of coal, but of this amount it has so far only sold 650,000 tonnes.

Vale is in discussions with the government and other partners (such as the port and rail company, CFM) about measures that could be taken to produce more coal, but without accumulating further losses. Gutemberg thought the government had a key role to play in revising the current level of taxation. He said that Vale-Mozambique had paid 18.4 million dollars in taxes in the first quarter.

“We are discussing with everyone involved in the value chain what can be done”, he said. “How can the efficiency of everybody involved be improved so that the costs can be reduced? We believe that it is the duty of the government to understand that the level of taxation can, to some extent, contribute to the competitiveness of the industry”.

But, despite the losses, Gutemberg said that Vale has every intention of continuing to invest in Mozambique. So far Vale's investment in the country is in excess of 367.6 million dollars.

The company hopes to expand its mining capacity to 11 million tonnes a year - 8.5 million tonnes of coking coal for the steel industry (where the clients are likely to be China and India), and 2.5 million tonnes of thermal coal. Much of the thermal coal will be burnt at a power station to be built at the mouth of the Moatize mine.

In the longer term Vale hopes to increase production to 22 million tonnes a year. The port of Beira, and the Sena rail line from Moatize to Beira, cannot possibly deal with these amounts of coal, particularly as Vale is just one of several mining companies operating in the Moatize coal basin.

Vale is therefore building a railway across southern Malawi to link up with the existing northern line to the port of Nacala. This railway and a new coal terminal at Nacala-a-Velha should be complete by December this year.

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