Why Vale decided to sell another one of its Australian coal mines

Looks like Vale is at it again. The Brazilian mining giant is selling one of its coal mines in Australia for the second time since July. As our sister...

|Sep 2|magazine10 min read

Looks like Vale is at it again.

The Brazilian mining giant is selling one of its coal mines in Australia for the second time since July.

As our sister site Business Review Australia reported, Vale’s latest sale is a joint purchase between Glencore and Australia’s Bloomfield Group for the Integra coal mine complex in eastern Australia’s New South Wales.

Integra had produced about 4.5 million tons of coal annually before being shut down from both its underground and open cut mines. The site has been in “care and maintenance” since July 2014, as Vale believed keeping it open was no longer sustainable due to the low price of coal.

Now the company has moved on as it made a final decision that the operation is no longer economically viable. Once the sale is finalised, about 65 per cent of Vale’s coal output will come from its flagship Moatize project in Mozambique.

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Vale has attempted to sell Integra since 2012 when it was believed to be worth about AU$500 million, while the price in which the Brazilian miner is selling for now is currently undisclosed.

The sale goes along with Vale’s plans of owning assets able to produce large volumes at competitive costs, and the deal is expected to be completed within the next few weeks.

The Brazilian company owns 61.5 per cent of Integra, while Asian steelmakers, manufacturers and power companies such as Japan’s Toyota Industries Corp, JFE Holdings Inc and South Korea’s Posco have also agreed to sell its stake.

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Last month, Vale sold its mothballed Isaac Plains coking and thermal mine to Stanmore Coal for just AU$1 during a mining downturn that took away thousands of jobs and led to billions of dollars in losses. Between that and the news of the new Integra sale, Vale has seen a 7.2 percent reduction in total coal output according to its 2015 first-half results.

Under the agreement, Glencore will take over the underground operations with Bloomfield acquiring the open cut mine.

While Glencore recently said it has no plans to resume mining in the immediate future, Bloomfield wants to integrate its portion of the mine into the company’s existing operations.

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Bloomfield’s intentions to reopen operations will be a boost to the Aussie job market, as over 4,000 jobs have been cut at Australian coal mines over the past two years.

“This is a logical and unique opportunity that would strengthen our ability to operate over the long term,” said Bloomfield managing director John Richards. “The deal would breathe new life into the Integra open-cut site and will sustain local employment.”

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