Vale Renegotiates Railway Concessions Deal, Commits $1.8B Investment

Vale S.A. VALE has successfully renegotiated railway concession contracts for the Carajás Railway (EFC) and Vitória a Minas Railway (EFVM) with local authorities. The company has committed an investment of approximately R$11 billion ($1.78 billion) to improve the infrastructure and efficiency of the railways.

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The negotiations between Vale and the Brazilian National Land Transportation Agency and the Brazilian Federal Government, through the Ministry of Transportation, had been going on for some time. It aims to modernize and update the existing contracts. The transaction terms will result in a R$1.7 billion ($0.28 billion) increase in Vale’s provisions related to the railway concessions. The company stated that the agreement still awaits additional approvals.

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On Dec 16. 2020, VALE announced that concession agreements of EFC and EFVM were extended by 30 years till 2057. The company had then undertaken total commitments estimated at R$24.7 billion by 2057, including grant payment; concession grants as well as expansion of passenger train service expansion and works to reduce urban conflicts, among others.

Vale operates an extensive logistics network, which seamlessly integrates mines, railroads, ships and ports, ensuring efficient and safe transportation of iron ore. In addition to the approximately 2,000 kilometers (1,243 miles) of railroad network in Brazil, the company has operations in Indonesia, Oman, Malaysia and China. In addition to transporting its own products, VALE also carries cargo to third parties. The company operates two passenger train lines in Brazil as well.

The Vitória-Minas Railroad stretches 905 kilometers (562 miles). It facilitates the transporting of iron ore from Vale and the movement of general cargo for third parties (coal and agricultural products). The railroad connects iron ore operations from the inland of Minas Gerais to the Port of Tubarão, in Espírito Santo. The railway also operates a passenger train serving about 1 million passengers annually.

The Carajás railroad spans 972 kilometers (604 miles). It is used in transporting iron ore, pig iron, manganese, copper, fuels and coal. It connects the mines of Carajás, in Pará, to the Maritime Terminal of Ponta da Madeira, in Maranhão. It also offers a passenger train service.

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Shares of Vale have lost 22.8% in the past three months, in line with the iron-mining industry.

Image Source: Zacks Investment Research

Vale currently carries a Zacks Rank #3 (Hold).

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