Vale announces 100 million dollars loss in Q2

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Vale announces 100 million dollars loss in Q2

10:05 CAT | 02 Aug 2016

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The Brazilian mining company Vale has announced a loss of 100 million US dollars for its operations in Mozambique in the second quarter of this year. According to the company, this follows on from a loss of 112 million dollars in the first quarter of 2016.

During the period, the company managed to reduce costs by 58 million dollars. As a result, the production cost of its coal (at port) dropped by 39 per cent to 103 dollars per tonne.

Vale explained that the fall in costs was “mainly as a result of the ramp-up of the Nacala Logistics Corridor”. Trains along this corridor run from its coal mine at Moatize, in the western province of Tete, through Malawi, to the port of Nacala-a-Velha. During the second quarter, these trains carried 1.655 million tonnes of coal, compared with just 761,000 tonnes in the first quarter.

According to Vale’s quarterly statement, the production cost per tonne should fall further as its Moatize II project and the Nacala Logistics Corridor continue to expand.

However, the mine has a long way to go before it moves into profit as it is still making a loss for every tonne of coal that it sells. Vale reported that the FOB price of the benchmark Australian high-grade coking coal was just 84 dollars per tonne during the quarter.

There has been a slight increase in coal prices during the year. This is partly due to flooding in some of the big mines in Australia. In addition, the Chinese government is going ahead with its plan to close a thousand loss-making mines.

Whilst Vale is increasing the amount of coal it is sending along the railway to Nacala, it has had to declare force majeure on its route along the Sena railway to the port of Beira. This was due to an attack by gunmen from the opposition party Renamo on one of its trains on 25 July.

The train was ambushed as it passed through Inhamitanga, in Cheringoma district in the central province of Sofala. The driver was shot in the back whilst a security guard received cuts from flying glass.

This is not the first time that members of Renamo’s militia have attacked the line. In early June, two attacks were carried out on trains in the same area. As a result of these actions, Vale suspended its trains for a fortnight.

The company has also had its share of poor fortune along the Nacala Corridor. On 26 July, three people died and forty injured when a bus belonging to Nagy Investments drove carelessly over a level crossing and was hit by an oncoming train belonging to Vale. Th

Source: AIM