Vale Sells Systems Assets in Central And Western Brazil

On April 6th Vale announced that it had signed a binding agreement to sell iron ore, manganese and logistics assets in its Midwest system to J&F Mining, a subsidiary of J&F Investimentos, Brazil's largest commercial company. This includes taking full responsibility for the "take-or-pay" logistics contract by the buyer, subject to the agreement of the relevant parties.

Under the agreed terms, the transaction has an enterprise value of approximately $1.2 billion, with the assets contributing $110 million to Vale's adjusted EBITDA in 2021. Vale will receive about $150 million when the deal closes. J&F investment paid 1 billion reais ($215 million, 1.379 billion yuan), Valor Economico reported. In addition, with the consent of applicable counterparties, Vale will transfer to the buyer its obligations relating to the take-or-Take logistics contract and other liabilities existing in the assets of the company described above. The buyer will also assume operations with all employees of Midwest Systems.

The closing of the transaction is subject to the usual conditions precedent, including the approval of economic Defense Regulatory Council (CADE), National Waterway Transportation Authority (ANTAQ), National Defense Commission (CDN) and other competent regulatory authorities.

Vale's Midwest system consists of two production units, Corumba and Urucum, in Mato Grosso Do Sul. Colomba, an open-pit mine that produces about 2m tonnes of iron ore a year, was acquired by Vale from Rio Tinto in 2009 for $840m. Ulukum is one of Brazil's largest manganese mines, located near Colomba.

Vale said the sale of the Midwest system, which produced 2.7 million tonnes of iron ore and 200,000 tonnes of manganese ore in 2021, was in line with Vale's strategy to streamline its portfolio and focus on key businesses and growth opportunities under strict capital allocation guidance.