UPDATE 2-Miner Vale to sell 15-25 pct stake in coal operations

Thu Dec 5, 2013 4:03pm EST

(Adds comments from Vale CEO, details and comments on Serra Sul project and on Vale iron ore strategy)

* Coal accounts for 2.3 pct of Vale's revenue, fertiliser for 7 pct

* Vale lost 7 percent share in iron ore market since 2007

* Coal 25 percent stake could fetch $1 billion -analysts

By Silvia Antonioli and Clara Ferreira-Marques

LONDON, Dec 5 (Reuters) - Brazilian miner Vale plans to sell a 15 to 25 percent stake in its coal operations, including projects and mines in Australia and Mozambique, and has had interest from potential partners including coal buyers, it said on Thursday.

Vale, the world's largest producer of iron ore, has cut spending plans for 2014, a third consecutive year of reduction. It hopes the partnership in coal, along with the sale of a stake in its Mozambican rail link and in fertiliser assets, can bring funding, cut capital commitment and help mitigate risk.

In the case of coal, a partnership could also tie in one or more major customers, Vale said.

Analysts put a net asset value on Vale's coal operations of roughly $4 billion - though most of that value is Moatize in Mozambique, one of the largest metallurgical coal mines in the world - meaning a stake sale could raise as much as $1 billion.

"The assets in Australia and Moatize (in Mozambique) will go in a coal vehicle. We are looking to sell a stake of between 15 to 25 percent, but we are flexible, depending on the proposal," Roger Downey, head of Vale's fertilisers and coal division, said at a London press conference.

Apart from Moatize, Vale owns mines in Australia including a majority stake in the underground Carborough Downs mine, along with a 50 percent stake in Isaac Plains - a joint venture with Sumitomo - and 61 percent in the Integra mine in New South Wales' Hunter Valley. It also has undeveloped projects including the Belvedere project in Queensland.

In 2012, Vale produced over 5 million tonnes of metallurgical coal and almost 2 million tonnes of thermal coal.

The company is also, separately, seeking to sell a minority slice of its stake in a group that is expanding a rail and port corridor used to move coal from Moatize to the port of Nacala, hoping to cut back a $4.4 billion investment bill.

The importance of the railway to non-coal operations such as agriculture has led Vale to look for outside partners for the rail link, the miner said.

Vale's fertilizers business, which accounts for about 7 percent of its revenue, includes operations in Brazil and Peru and projects in Canada and Mozambique. The company said it was too soon to make a decision on Carnalita, a $4 billion potash project in Brazil's northeastern Sergipe state, despite local government hopes that production could start by 2017.

MORE IRON ORE

Vale, which under its previous boss had tried to diversify to compete with rivals like Rio Tinto and BHP Billiton , is now refocusing its efforts on iron ore, its main business, taking on fewer, bigger projects in other sectors.

Iron ore makes up for about two-third of the company's revenue, and the company aims to claw back lost market share.

"Diversification at any cost, to boost volumes and to be the number one miner is not our aim. We want to be bigger in world class projects, without caring if we are number one, two or three," Chief Executive Murilo Ferreira said.

Until 2007, Vale had a 32 percent share in the global iron ore market but estimates it sank to a quarter in the last few years, due to difficulties in production expansion.

It is now trying to regain some of the lost ground and expects iron ore production capacity to rise from 306 million tonnes in 2013 to 450 million in 2018.

Its main expansion project is $19.5 billion Serra Sul mine in Brazil, which is expected to start operation in 2016.

Ferreira said that company was "working very hard" to make sure there were no fresh delays or overruns at Serra Sul.

But Vale's ability to expand iron ore output at its giant Carajas mine in the Brazilian Amazon will be limited by rail capacity, even after it resolves ecological and archaeological preservation issues related to mine-site caves, iron ore boss Jose Carlos Martins said.

Vale's push abroad handed it a stake in half of the Simandou iron ore deposit in Guinea - one of the world's largest. But the future of the deposit has been in question since the government began a review of the licence held by Vale and its partner, entrepreneur Beny Steinmetz's mining business.

Ferreira said the group was waiting for the Guinean government to reach a verdict on the disputed licence and on the rules that will govern the development, before deciding whether to progress with the deposit.

A hearing on the licence is due next week. (Additional reporting by Jeb Blount and Sabrina Lorenzi in Rio de Janeiro; Editing by Keiron Henderson and Anthony Barker)

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