Mozambique Coal Logistics: Govt, Vale, Mitsui & banks sign US$2.7 million contracts for Nacala Corridor

The Mozambican government, companies and funders of the Nacala Logistics Corridor in Mozambique signed financing contracts worth US$2.7 billion related to the project in Maputo yesterday.

The corridor makes Brazilian mining company Vale’s coal mines in Moatize, Tete, inland Mozambique viable for more than three decades of useful life ahead, but also has a social function, said Alexandre Pereira, Executive Business Support Officer at Vale.

Transport of goods and passengers has become a reality for previously isolated areas of Mozambique and Malawi, with benefits that can be shared with other countries, he said.

Mozambique Minister of Transport and Communications Carlos Mesquita said he expected the rail line to transport four million tonnes of cargo per year, in addition to the expected 18 million tonnes of coal.

The minister pointed to the value of the investment and the partners involved as a sign that Mozambique remained a good destination for international investment, and somewhere which enjoyed peace and good governance.

The pair were speaking at a ceremony attended by Ministers Letícia Klemens (Natural Resources and Energy), Adriano Maleiane (Economy and Finance) and Minister Mesquita at which the contracts were signed.

The project is presented by Vale as an example of the internationalization of Brazilian companies in Africa, as well as cooperation between Brazil and Japan, which “occurs nowhere else in such an intense and promising way”, Pereira said.

The Nacala corridor, in operation since 2016, is a US$4.5 billion investment that brings together Brazilian multinational Vale, the Japanese conglomerate Mitsui and the Mozambican public railroad company CFM.

The project includes a deep-water port in Nacala, northern Mozambique, linked to a 900-kilometer rail line which transports coal for export.

In the long-term financing agreement formalized yesterday, the Japan Bank for International Cooperation (JBIC) supplies about US$1 billion, with a similar amount raised by a consortium of Japanese banks in a loan guaranteed by Nippon Export and Investment Insurance.

The South African Export Credit Agency similarly guarantees a US$400 million loan from ABSA, Investec, Rand Merchant and Standard Bank of South Africa, while the African Development Bank has a US$300 million share.

Repayment is expected over 14 years according to a tariff related to the coal and general cargo transportation services provided by the tariff corridor introduced in April after the conclusion of the capital transaction between Vale and Mitsui and subsequent reconsolidation of the corridor.

The funds received “will mainly be paid to Vale to cover loans made by shareholders during the construction of the corridor, but will also be used to support the acceleration of the venture,” the company said in a statement.Source: Lusa