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Funding concluded for Nacala Corridor

Vale and Mitsui have announced that they have signed binding contracts for US$2.73B in finance for the development of the Nacala Logistics Corridor (NLC), including railway and coal terminals.

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Japan Bank for International Cooperation is to lend US$1.030B, and the African Development Bank US$300M, while Nippon Export and Investment Insurance is to insure US$1B from a consortium of mainly Japanese banks, and Export Credit Insurance of South Africa Ltd is to insure a further US$400M from a consortium of four South African banks. The Japanese government has already helped to finance the development of the Port of Nacala through its development funding.

Vale Moçambique has invested US$4.4B in mine and transport infrastructure in Mozambique to date. The new finance will be used to reimburse Vale for the investment it has made in building the NLC and also to ramp up capacity on the line, which runs for 906 km from the Moatize coal fields in northwest Mozambique to the deepwater port of Nacala-aVelha through Malawi. In a statement, Mitsui said: “The project finance also demonstrates the institutional maturity and the government support in both Mozambique and Malawi.”

The money is to be repaid over 14 years. NLC will mainly generate revenue from providing coal services on the twin-track line, but also from general cargo services.

The main shareholders have sought to help NLC operate commercially by increasing the tariffs they charge themselves. Vale’s unit costs increased from US$89.30/t in Q2 to US$93.80/t in Q3 this year because of the higher tariffs charged by NLC. The line carried 5.5 Mt of coal last year, but it will soon have the ability to transport 18 Mtpa, with further increases possible at a later date.

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