The Nacala Project Finance proceeds as planned, with the approval of the NEXI and JBIC Councils taking place during 3Q17, Vale says in its latest 3Q17 Performance Report.

Now with all creditors (including AFDB, ECIC and commercial banks) completing their approvals, the next step is the signing of Project Finance, which will take place on November 22, 2017.

COSTS AND EXPENSES
Coal costs were impacted in 2Q17 and 3Q17 as a result of the gradual introduction of the
Nacala Logistics Corridor (NLC)’s tariff. The NLC was deconsolidated in March 2017 upon
completion of the equity transaction with Mitsui.

In 2Q17, after the deconsolidation, a tariff was established to cover operation costs, investments, working capital and taxes. In 3Q17, NLC’s tariff started to include a parcel of debt service and amortization, in anticipation for the signing and closing of the Project Finance. Part of that tariff increase will service the Project Finance debt, whereas part of it will remunerate Vale’s remaining debt instruments to the NLC (the Project Finance will repay part, but not all, of those debt instruments).

The portion of the tariff increase allocated to Vale’s own instruments partially offsets the increase in tariff costs and is recognized back into Coal Adjusted EBITDA.

Proforma Coal costs and expenses totaled US$ 314 million in 3Q17 (or US$ 370 million with depreciation charges), decreasing US$ 10 million against the US$ 324 million recorded in 2Q17, mainly as a result of lower mine and plant costs (US$ 16 million) and lower expenses (US$ 6 million), which were partly offset by higher sales volumes (US$ 3 million) and the net effect of the higher tariff at the NLC (US$ 13 million, being US$ 80 million tariff increase less US$ 67 million provisioned for debt service payments to Vale).

Proforma production cost per ton of coal shipped through the Nacala port29 increased by US$ 4.5/t, from US$ 89.3/t in 2Q17 to US$ 93.8/t in 3Q17, due to the impact of higher tariffs charged by the NLC in 3Q17 (US$ 32.8/t), which were partially offset by the provision for NLC’s debt service to Vale (US$ 24.8/t).

After excluding the effects of the tariff related to non-operational costs, production cost per ton would have been US$ 71.3/t in 3Q17, 3.8% lower than the US$ 74.2/t recorded in 2Q17.

Proforma production costs through the Nacala Logistics Corridor