Mozambique Mining: Vale net Moatize coal revenues up by $69M

Brazilian mining major Vale has reported that its coal business, which is composed almost entirely of its Moatize coal operation, in the north-eastern Mozambique province of Tete, increased its net operating revenues during the third quarter of this year (3Q18) by $69-million, compared with the second quarter (2Q18).

Whereas the revenues for 2Q18 totalled $356-million, revenues for 3Q18 came to $425-million. The revenues for the third quarter of last year (3Q17) were $360-million.

Moatize is primarily a metallurgical or coking coal operation, but also produces thermal coal. The net operating revenues for the mine’s metallurgical coal were $284-million in 3Q18, compared with the $261-million of 2Q18 and the $266-million of 3Q17. However, this increase was largely due to higher sales volumes, as the price realised by the company for its metallurgical coal fell by 5.3% during 3Q18, compared with 2Q18 (or $175.9/t in 3Q18 as against $185.9/t in 2Q18)

Operating Revenues

Thermal coal net operating revenues in 3Q18 were, at $141-million, significantly up on the 2Q18 figure of $95-million and the 3Q17 number of $94- million. Thermal coal sales benefited from higher realised prices. These were $3.1/t up in 3Q18 (to $89.2/t), compared with 2Q18 ($86.1/t). This increase in realised prices was, the company stated in its ‘Vale’s Performance in 3Q18’ report, “mainly due to higher lagged indexed prices as the market index trended lower in the quarter”.

(The metallurgical coal index price for 3Q18 was $188./t, compared with $190.2/t in 2Q18 and $188.8/t in 3Q17. The thermal coal index price was $101.6/t in 3Q18, compared with $100.3/t in 2Q18 and $86.6/t in 3Q17.)

However, earnings before interest, taxes, depreciation and amortisation (Ebitda) were down. Higher Costs “The adjusted Ebitda of Vale’s coal business was $16-million in 3Q18, $29-million lower than in 2Q18, as higher costs associated with the structural changes being implemented in the business and lower metallurgical coal realised prices more than offset the positive impact of higher sales volumes and lower expenses,” observed the report.

“Costs totalled $433-million in 3Q18, $106-million higher than in 2Q18, mainly owing to higher volumes and the implementation of initiatives associated with the structural changes in the coal segment, such as the increase in removal of overburden, the opening of new mine sections and preparation of selected mining pits for future tailings disposals,” stated the report. “Despite the short-term impact on costs, these initiatives will ensure a sustainable ramp-up of Moatize from 2019 onwards.”