Brazilian global major mining group Vale has revealed that it plans to invest $2.573-billion in its Mozambican coal and associated logistics projects next year. This figure excludes funding for operation and maintenance. The miner classifies its activities in the south-east African country as “integrated mine-plant-railway-port coal operations”. The mine and plant are located at Moatize in the inland Tete province.

Of the 2014 funding allocated to Mozambique, $761-million is for the development of Moatize Phase 2, which will double the Moatize operation’s annual output capacity to 22-million tons. This project involves the excavation of a new openpit, the duplication of the coal handling and preparation plant and of all the associated infrastructure. The total investment needed to develop Phase 2 is budgeted at $2.068-billion and it is due to commence production in the second half of 2015.

The bulk of the investment, $1.812-billion, will go into the development of the railway link from Moatize, through Malawi, to the Mozambican Port of Nacala, and of the requisite harbour infrastructure there. This will complement the existing Sena railway, which runs from Tete/Moatize to the harbour city of Beira, but lacks the capacity to handle the coal being mined by Vale (let alone the other miners producing, or planning soon to produce, coal in Tete province). The Nacala railway and port operation will have a nominal capacity of 18-million tons a year, and is scheduled to start operating in the second half of next year.

The investments in the group’s Mozambican coal operations represent the overwhelming majority of its planned investments into its global coal activities next year, which total $2.601-billion – to put it differently, only $28- million of Vale’s investment in coal will be outside Mozambique. It should also be noted that this figure represents 28% of the group’s total global project execution budget for 2014.

Consequently, it is safe to assume that the bulk of the $179-million that will be spent on sustaining coal operations – which is not included in the $2.601-billion figure – will also go to Mozambique. Of this number, most ($156-million) is for funding operations. Vale also plans to spend $51-million on coal research and development (R&D) – mainly exploration worldwide next year – or 5.6% of the total R&D budget. Of this, $20-million will go to “exploring opportunities” in coal.

“We are strongly committed to deploying capital only in world-class assets with large reserves, low costs, high-quality products and opportunities for low-cost brownfield expansions,” affirmed Vale CEO Murilo Ferreira. Vale’s other main business areas are ferrous metals (iron-ore and pellets – Vale started as an iron-ore miner), base metals (copper and nickel), fertilisers (potash and phosphate rock), steel, power generation and logistics (ports, railways and shipping). Ferrous metals will receive 58.2% of the group’s 2014 project execution budget, while base metals will get 8.5%, fertilisers 0.6%, steel 2.8% and power generation 1.9%.

However, Ferreira has also announced that Vale plans to reduce its shareholding in the Nacala Corridor development (which includes the railway from Moatize and the port) next year. Currently, the miner holds 70% of the Nacala Corridor project. This could be cut to 35%, although Vale wants to keep control of the operation. “One of the objectives is to mitigate the risks of that project and also reduce its capital investment obligations,” he stated. In Maputo, it is expected that Vale’s selling of shares in the Nacala Corridor will benefit the country’s fiscus through capital gains taxes.