Brazilian mining company Vale and its Japanese partner Mitsui have signed a $2.73bn project financing deal to fund the Nacala Logistic Corridor (NLC) that will link the Moatize coal mine in Mozambique to the Nacala port.
As part of the agreement, Japan Bank for International Cooperation (JBIC) will provide a $1.03bn loan while a $1bn loan will be secured from a consortium of financial institutions, including Sumitomo Mitsui Banking, The Bank of Tokyo Mitsubishi UFJ, Mizuho Bank, Sumitomo Mitsui Trust Bank, Nippon Life Insurance Company and Standard Chartered Bank.
Export Credit Insurance of South Africa will insure a $400m loan and the African Development Bank (AfDB) will invest $300m.
Vale stated that the project funding also demonstrates the institutional maturity and the governmental support in both Mozambique and Malawi.
Under the terms of the financing deal, Vale is required to repay the loan in 14 years.
The loan will be repaid with the help of proceeds generated from the tariff related to the coal transportation services and general cargo services provided by NLC.
The company has been investing in logistics infrastructure to sustain the expansion of Moatize coal mine’s capacity.
The majority of the funds will be used to take out part of Vale’s shareholder loans conceded for construction of NLC, while a portion of the financing will be used to support the production increase of the corridor.
As part of the project, 682km of existing railway track between Malawi and Mozambique will be restored.
The project also involves the construction of a maritime terminal and new track installation.
The works will help increase the capacity to 18 million metric tonnes of coal a year.