Brazilian mining giant Vale S.A (VALE) has approved a $6 billion expansion of its Moatize coal project in Mozambique. The expansion was initially expected to lift 11 million tones of coal; gradually rising upto 22 million tones of output per year. The first production from the expanded mine of Moatize, the largest coal project of Southern Hemisphere, was forecasted for the second half of 2014. The company has also planned to develop new infrastructure for the Nacala deepwater port for supporting coal shipments.
Vale estimated that most of the output from Moatize will be coking or metallurgical coal used in steelmaking; which they expect to export to Brazil and other steelmaking markets. They organized optimal plans for shipment expecting that the ships emptied of iron-ore in Asia can be filled with coal in Mozambique for return journeys, which will be delivered to the domestic clients.
The recent $6 billion expansion is therefore, a step closer to Vale’s two most important strategies–expanding coal mining business, with the view of offering higher range of products to steelmakers and increasing efficiency of its transport systems via better route network.
In a separate story, Moatize thermal coal project in Mozambique has recently reported to have shipped two thermal coal vessels to Oman. Two more vessels of coking coal are also sent to Europe via Richards Bay. The shipments have presently utilized the existing port of Beira for exports via 360 miles rail line. Upon completion of the approved expansion, the shipments are expected to follow the routes through Nacala port and rail corridor through Malawi leading to a cost effective transit.
Vale S.A. engages in the mining and production of ferrous and non-ferrous metals, also operating in coal mining, fertilizer business and logistics. It is one of the world’s largest producers and exporters of iron ore and pellets. The company keeps improvising its competitiveness against rivals Rio Tinto Plc (RIO) and BHP Billiton Ltd (BHP).
We currently maintain a long-term Neutral recommendation on the stock. Vale has a Zacks # 3 Rank, which translates into a short-term Hold rating (1-3 months).
