Maputo — The Japanese company Mitsui, has announced its intention to pull out of the coal mining business in Mozambique.
In March 2017, Mitsui acquired, from the Brazilian mining giant Vale, a 15 per cent interest in the Vale subsidiary that owns 95 per cent of the open cast coal mine at Moatize, in the western Mozambican province of Tete, and a 50 per cent stake in another Vale subsidiary that operates the 912 kilometre railway from Moatize to the mineral port at Nacala-a-Velha on the northern Mozambican coast.
A Mitsui press release, on Thursday, said that since 2017, Mitsui had worked to develop the Moatize and Nacala projects, but "Vale made a decision to divest its coal business to concentrate on its core activities. In response, Mitsui decided to sell its equity stake to Vale in the context of reorganization and restructuring of the asset portfolio".
The release added that "Vale will continue to operate the Projects after their acquisition of Mitsui's interest, and will ultimately consider divestment of its interest to a third party".
It announced that on Wednesday Mitsui and Vale "entered into a Heads of Agreement ("HoA") stipulating the main conditions for the transfer of all of Mitsui's interest in the Projects and associated loans to Vale, for the sum of US$ 1.00 each".
Mitsui says that a definitive agreement for the transfer of the interests and the associated loans will be signed "once all related parties reach an agreement on detailed terms and conditions and both Mitsui and Vale obtain the required internal approvals". The transfer is expected to be completed "throughout 2021, following the fulfillment of conditions precedents, including obtaining the necessary consents and approvals".
Mitsui adds that it is "currently reviewing the anticipated loss that will result from the transfer".
According to the Reuters news agency, Mitsui has posted a series of impairment losses, totalling 46.7 billion yen (about 451 million US dollars), on its Mozambique coal and infrastructure assets, taking the book value of its stake in the Moatize mine to zero. The Nacala transport corridor still has a book value of about 500 million dollars, including its loans.
A release from Vale made it clear that buying out Mitsui is the first step towards divesting its coal business, which is part of a drive to become carbon neutral by 2050.
Vale says that this divestment "will be guided by the preservation of the operational continuity of the Moatize mine and the Nacala Logistics Corridor, through the search for a third party interested in those assets".